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By the numbers: how automation is affecting financial services jobs

02 / 12 / 2019

Andy Haldane, the Bank of England's chief economist, has regularly hit the headlines for his outspoken opinions on artificial intelligence (AI) and automation. In 2015, Mr Haldane claimed the jobs of up to 15 million people across the country could be replaced by robots in what he called a "third machine age".

Last year, he again emphasised the possibility of a "hollowing out" of the labour market if AI continued to advance and automate roles that require cognitive skills. However, the OECD has downplayed the potential of mass unemployment, arguing that previous studies underestimated how difficult it is to automate most jobs.

So, who's right? And what impact will automation have on the financial services industry in particular? Let's untangle some of the latest research and statistics to see how AI and automation could affect the sector over the coming years.

The rise of the robots

PwC estimates around 30% of jobs in the UK could potentially be automated by the middle of the 2030s, which is when the 'third wave' of automation is expected. The Big Four firm's predictions for the next few years are far more conservative; just 2% of people's jobs are expected to be at risk of automation by the early 2020s.


Financial services are forecast to be among the most vulnerable sectors to automation in the short term because algorithms will help produce faster, more efficient analysis, assessments and reports. A KPMG-led study suggested up to 20% of jobs in the sector could automated within just five years. Around 40% of banks and half of insurers believe at least a fifth of their workforce will be replaced by robots during this time.

Across the pond, robots could replace up to 1.3 million Wall Street jobs by 2030, according to recent figures from IHS Markit. The British insights firm predicted the global business value of AI in banking will reach $300 billion, or £229 billion.

Robotic process automation (RPA), which relies on bots and AI workers to perform business processes, is also gaining momentum worldwide. More than half (53%) of organisations are already beginning to implement RPA, and Deloitte predicts the technology will have near-universal adoption by 2023.

 

Which employees will see the biggest impact?

Every industry is unique, and analysts suggest some demographics will face a greater impact than others. For example, PwC believes that 4% of women compared with 1% of men will be affected by automation in the early 2020s, but this trend will have reversed to 34% of men and 26% of women by the mid-2030s. The Big Four firm said this is because women currently hold more clerical and other administrative jobs, which are easier to automate. Over the long term, autonomous vehicles and similar machines will be adopted in industries that are traditionally more male oriented, such as transport and construction.

Figures from the Office for National Statistics show young people are the age group where automation is likely to have the biggest impact. As we can see in the graph below, nearly 16% of 20-24-year-olds were at risk in 2017: 

AI and automation are likely to have a similar impact on jobs across all education levels in the early 2020s, but those who have higher education qualifications will be less at risk over the long term. According to PwC, 47% of jobs held by people with GCSEs or lower could be at risk by the mid-2030s, compared with just 12% of graduates.

Job creation should offset losses

At first glance, some of these statistics may well be worrying for the financial services industry. But it's important to remember that automation and AI don't just replace jobs, they create them. They can also free up employees from tedious manual processes to work on more analytical and strategic projects.

However, there is a lack of consensus regarding how many job losses will be offset by new roles. The KPMG CIO Survey suggests 69% of organisations believe newly created jobs spurred by automation should adequately compensate for any losses.

On the whole, employees are also confident about the future. While nearly a quarter (23%) told YouGov they were concerned about their job being automated, 73% believed they would be able to adapt to a future where robots had replaced them in their current role. Similarly, nearly three-quarters of Americans believe AI will eliminate more jobs than it creates (rising to 79% in the financial, insurance, real estate and consulting industries). Yet, only 23% were 'worried' or 'very worried' they would personally be affected.

This is possibly an example of optimism bias, which is a human cognitive bias that causes us to believe we are personally less likely to be affected by a negative event than other people. Mr Haldane, when asked by BBC Radio 4 whether he thought his own job was at risk to automation, replied: "There will still be an important role for human judgment."

Possible optimism bias aside, it's encouraging that staff are broadly confident they will be able to navigate a future employment market where automation and AI adoption is only increasing. But how will they do this?

Automation and AI are here to stay

We've already briefly touched upon the rise of RPA in financial services, but if we delve a little deeper, the figures are compelling. The Deloitte survey revealed the technology is exceeding expectations in many organisations, with a majority of respondents saying it improves compliance (92%), quality and accuracy (90%), productivity (86%) and cost reduction (59%).

There is some disagreement over whether RPA counts as AI, largely because most of its use cases don't demonstrate true 'intelligence'. RPA technologies don't typically learn as they go, for example. Machine learning (ML), on the other hand, is firmly in the AI camp, and it's also seeing increasing adoption among financial services organisations. The BoE recently published an in-depth report that showed ML is now used across a range of business functions from the front to the back end.


So, how willing are UK employees to learn the skills they need to adapt to automation and AI in the workplace? The answer is very willing, according to PwC. The firm found only 11% of people would not consider upskilling or completely retraining if required. Sadly, 51% of workers claim they are offered no opportunities to train or upskill at all.

"While technology will likely create as many jobs as it displaces, people need to learn new skills and develop their understanding in order to adapt," said Kevin Ellis, Chairman of PwC UK.

"Without combined efforts from governments, businesses and NGOs, swathes of people risk being left behind, exacerbating social and economic inequalities."

Preparing for an automated future

The impact of automation and AI on jobs may be fairly limited for now. But research suggests financial services could be among the most heavily affected industries in the short term, notwithstanding the fact new employment opportunities will be created as a result of automation.

Organisations that upskill and retrain their staff to work alongside emerging technologies should be well placed to take advantage of the growth opportunities that automation provides. Meanwhile, professionals who believe their job is at risk of automation may wish to consider proactively upskilling or familiarising themselves with relevant technologies to ensure they are ready to evolve with their role.

If you would like to discuss how automation and AI may affect your organisation or role, please contact me today on 020 7936 2601 or via email at dh@barclaysimpson.com. We'd love to help you secure the skills you need to thrive in an automated world.

Our 2019 Market Reports combine our review of the prevailing conditions in the corporate governance recruitment market with the results of our latest employer and candidate surveys.

Image credit: Alex Knight via Unsplash

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