Automation: The Risk to Financial Jobs

Suppose it is 2030, and you’re teaching in a business school. What will be your reaction to seeing just a handful of learners attending your class?

Well, it must be disappointing, but it has nothing do with your pedagogical skill, nor it’s about the subject matter you’re teaching or your school’s ranking. Students do not enroll simply because the finance sector has no jobs for them. And automation is one of the main reasons behind this phenomenon.

You might find it hard to believe because management, economics, finance, and accounting are some of the popular subjects at the graduate level in the most universities. Students opt for these subjects as they are associated with high employability however; that is changing due to advances in technology and automation.

According to Opimas a renowned consulting firm, the future is going to be harder for many universities in terms of selling business-related degrees. Another latest research showed that by 2050, nearly 230,000 financial jobs will be lost to artificial intelligence agents and bots.

To put it simply, when a vehicle manufacturer finds aluminum or any other material lighter, easier and cheaper to make cars with than steel, they stop using it. They replace it to gain functional and financial advantage. It is the same when it comes to evaluating the future of the finance sector.

The current situation raises a few questions:

Are current and prospective financial jobs under threat? Are robotic advisers/employees the future of finance?

Let’s find out.

Artificial Intelligence- A New Generation

A survey from Aite Group –a research firm evaluated that businesses have started investing in automated portfolios. The investment rate increased to 210% in 2015. Many recent reports by market analysts found that robo- advisers have taken over already in some giant corporations. Wall Street is just one of the examples that have replaced hundreds of its financial analysts with robo advisors and high-tech software.

Oxford academics in its 2013’s paper claims that approximately 74% of professions are at high risk of becoming automated in the next 10 to 20 years; 54% of jobs among them will be in the finance industry, which is alarming. The phenomenon is not just confined to the United States. Indian banks, for example, have also reported a decline of 9% in headcount in the last two consecutive quarters due to the hiring of robots at the workplace, which shows how automation is taking over in the finance sector.

Perhaps, it’s not surprising in finance, particularly as the banking industry is all about processing information. And most of its key operations, like passbook update and cash deposits, have been digitized. This is one of the reasons why financial institutions and banks are adopting advance Artificial Intelligence (AI) technology.

This new generation of technology has enabled institutes to automate their financial tasks that were traditionally performed by humans. That includes risk management, operations, algorithmic trading, and wealth management.

For instance, the COIN program and Contract Intelligence that run on a specific machine learning system, help banks shorten the time taken to review loans. Plus, the software is great at providing impeccable loan servicing to customers. Considering AI‘s growing dominance, Accenture predicts that the banking sector will make AI a’ primary way of interaction with the customers within three years. It is because AI enables a simple and easy user interface to help banks provide a human-like client experience.

Luvo, in this regard, is a virtual chatbot that uses IBM Watson technology to learn and understand from human interaction, making manual workforce redundant in the process.

Fintech Grads- A Traditional Threat to Banking

This might sound surprising to you, but universities are revising and reviewing their traditional education blueprints to adapt to new technological disruption in the financial job market. Business schools, like Georgetown and Stanford University, are planning to include “fintech” in their MBA programs. This inclusion aims to make students learn, understand, and master financial technology.

One reason why Fintech firms are being considered an existential threat to traditional banks is that they work differently than traditional banks. Plus, not only do fintech firms understand consumer issues, but also solve them in a fraction of time. They have become a reliable funding option for customers look to invest in various businesses.

The key weakness of the banking system lies in its technical debt. Banks are lagging due to their antiqued IT setups that date back to last century. Fintech, on the other hand, is in a winning position with its fast-moving and technology-led services, particularly in investment and loan systems for e-commerce businesses.

Kabbage is a perfect example that gives technology-led loans to e-commerce businesses for which traditional banking is not only slow but also inflexible when it comes to lending finances.

Application Programming Interfaces (APIs)

Application Programming Interfaces (APIs) is another financial innovation that enables Fintech providers to create applications on data of bank accounts. APIs will be a long-term solution for data providers as it takes away the crucial information (that only traditional banking employees have). Fintech providers will have the same quantity and quality of data without having any physical branches.

Is Dependence on Robo Advisors Safe?

There is no denying that robot advisers, AI, and Fintech are changing the way traditional banking is done. Many financial analysts consider them the biggest drivers in the financial sector.

However, for many analysts, it’s still not clear to what extent automation and AI will prove to be advantageous for the financial sector. They believe that relying completely on artificial intelligence could backfire if there are no humans to supervise everything.

No doubt robo advisors are inexpensive and save a lot of time and effort when it comes to creating investment portfolios. But there is no guarantee that they will not struggle when it is about taking correct precautionary measures if the market becomes volatile and thousands of machines are trying to operate the same thing at great speed.

In 2012, Knight Capital Group- a robo stock trader lost $450 million in just 40 minutes when it went on a spending spree. That means these well programmed and high-tech robo-traders can cause chaos and fatal errors in the financial markets.

Final Thoughts

Overall, there is no denying that rapidly growing dependence on automated devices and robo-technologies are raising many concerns for financial jobs. From banking systems to other financial institutes, automated technologies, like Fintech, APIs, and AI, are considered an integral part of the operations. They are slowly taking over and making employees redundant.

 

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