Call it hype, paranoia, sport: no matter where you go, you can find a “thought leadership” article from a talking head, consultant, technologist, or “fintech founder” who says that a fintech or a challenger like Amazon is going take down banking. I get it – fear sells. However, as I’ve alluded to in the past – my money’s on banking, and it still is.
The latest hype is how AI is going to take away all of our jobs – not just in banking, but everywhere. I read an article today entitled “AI Could Kill 2.5 Million Financial Jobs – And Save Banks $1 Trillion” and I shared it on Twitter. The immediate feedback from IDC analyst @JamesWester was that the title didn’t match the content of the article. Evidently, there was a math calculation that the author got wrong. We can give them a pass on that. After all, not everyone is as good with numbers as the bankers.
But in terms of the hype headline, we’ve gotten to this place where fear-inducing headlines are the mouse trap cheese in the multimedia war for clicks. Isn’t the value of this technology interesting enough to talk about without scaring everyone to death? I think it is.
Let’s take a deep breath. The premise of the article is on point in conceptual terms. For example, AI is already feeding machine learning (ML) to automate certain manual processes in banking that are error-prone and subject to regulatory scrutiny. Automating the process using ML in trade reconciliation, for example, will lead to lower operating costs (headcount) and higher accuracy rates, which could result in less regulatory risk as well.
Yes, banks are going to lower costs by reducing manual labor, and that will result in fewer jobs. However, as we have seen in banking over the last two decades, certain jobs that require outdated skills become eliminated and new jobs take their place – so that things can be done the new, and presumably better, way.
Light at the end of the tunnel
Technology departments in banks have grown dramatically over the last two decades and at accelerating speeds in the last five years. The CIO has a major seat at the table, which never happened in the old days. That has changed dramatically since the digital revolution began, and it accelerated after the crash in 2008. The focus must be on deploying the right technology to compete and meet the ever-evolving expectations of the consumer and the marketplace. The vision of the CIO can now either make or break the success of any company.
CIOs are driving a much larger part of the company strategy in every bank, particularly in determining how to either compete against or collaborate with fintechs and non-traditional banking providers. As a result, IT teams are growing. The skill sets required to drive company strategy forward using technology are evolving, and jobs in these areas have to be created. In fact, there aren’t enough qualified candidates to fill the roles they’ve already developed.
Meeting this need will require a pivot in how people are trained and which skills they’re looking to develop as they enter into the job market. Whether it’s data science, ML, AI (dare I say, blockchain), all of these new technologies need to be built and implemented by humans. The light bulb replaced candles, but the energy industry grew – it did not shrink.
Innovation breeds optimism
As a “glass half-full” optimist and believer that change is good, I see nothing but opportunity in what’s happening with technology in every industry – including financial services. I know my life is getting easier and more efficient because I can shop from my phone for almost anything, or find a doctor and make an appointment in 10 minutes with an app. If I forget my credit card out on my morning run, I can use my phone to buy a bottle of water or pick up a bag of dog food on my way home. Banking is changing, every industry is changing – that’s Industry 4.0. And the best part is that it’s also improving lives in banking in ways never thought possible.
I hope you’re as pumped as I am now.
Where do you get started? SAP Leonardo is our methodology through which innovative, new solutions are being developed to solve business problems for our financial services customers. Whether through consulting or co-innovating with banks and fintechs, the sky is the limit.
Planning on attending the SAPPHIRE NOW conference? SAP’s financial services team has developed a variety of cool use cases for banking that use AI and ML, some of which will be explored in the Banking Industry Campus. I hope you’ll visit the Web site and explore the session catalog for more information on SAPPHIRE NOW so you, too, can become an optimist.