The banking sector is changing dramatically. Today, algorithms and chatbots work shoulder to shoulder with humans in banking. As the McKinsey report points out, artificial intelligence systems that never sleep are now the foundation of banking operations. While this provides greater speed and accuracy to banking operations, it also raises the fear of job losses.
Artificial Intelligence (AI) is not a sudden revolution in banking. It started with automation in banking. In the 1980s and 1990s, when Core Banking Solutions (CBS) were introduced, many manual tasks at the branch level were automated. In the 2000s, internet banking, ATMs, and the proliferation of debit and credit cards transformed the banking experience for customers.
In the 2010s, mobile banking apps, UPI, and digital wallets transformed banks into technology-centric institutions. As we enter the 2020s, artificial intelligence is taking banking to the next level. AI has entered the banking arena as the next phase of continuous digital transformation.
Will there be job losses?
A McKinsey report predicts that 30 percent of banking jobs will be automated by 2030. Meanwhile, a PwC survey also reveals that 60 percent of bank employees are concerned that AI will eliminate their jobs. The RBI also observes that it will directly affect many jobs in public sector banks in India, as AI takes over clerical work, data entry, check verification, account updating, and call center query handling. In fact, jobs are not disappearing, but rather changing.
For example, if a credit officer’s job was to collect documents and check loan eligibility, AI would now do all that. Meanwhile, human-level interaction with customers and ethical decision-making are all things that can only be done by officers.
New job opportunities are coming.
The world’s largest banks have started hiring AI ethics officers. The new jobs include data scientists, cybersecurity specialists, and human-AI collaboration managers. According to the World Economic Forum’s Future of Jobs Report 2023, the demand for AI & ML (machine learning) experts will increase by 40 percent by 2027, and the demand for data analysts by 30 percent.
Skill development training programs will be needed to make existing professionals in the banking sector suitable for new jobs. The HR department of banks should conduct a skill gap analysis, identify which areas of skills are lacking and provide digital and AI literacy training. International banks have created models in this regard. Citibank has launched a global AI training program. HSBC has launched an AI Talent Development Academy in collaboration with MIT and Stanford universities. JPMorgan is also training employees on AI tools.
In India, SBI has introduced ‘SIA chatbot’ and also implemented AI training modules for employees.
Need precise frameworks
There needs to be a clear framework to govern banks’ use of AI. Customer trust is the ‘currency’ of the banking industry. It is essential to protect the sensitive data of customers and banks, among other things.
The future of banking is the speed of AI and the compassion of humans. Banking cannot be driven by the efficiency of machines alone. Human values, responsibility, and trust are equally important. AI-human collaboration needs to become the new social contract in banking.
Changes AI is bringing to the banking industry
Customer service: Bank of America’s Erica chatbot has handled two billion customer interactions since 2018. SBI’s Takaa handles millions of queries in real time. With the advent of generative AI, language-based conversational banking will become commonplace.
Fraud Detection & Risk Management: AI detects unusual patterns through real-time transaction monitoring. This helps banks manage risk and fraud. AI credit scoring system is more accurate.
Compliance & RegTech: Relying on AI for compliance monitoring reduces costs and risks. HSBC and Standard Chartered are already using AI-driven AML transaction monitoring systems.
Investment Advisory: The risk that each individual can take on when it comes to investing will be different. Robo-advisors are used to prepare a portfolio according to individual risk tolerance. The Bank of England observes that advisory will be the trend in the future of wealth management.
Back-Office Automation: JPMorgan’s COIN system checks 12,000 contracts in seconds, a task that previously required 350,000 man-hours. AI is increasing efficiency in loan processing, reconciliation, and document verification.
A report released by the Reserve Bank of India points out that generative AI can increase the efficiency of operations in the banking sector by 46 percent.
