Two separate announcements have highlighted the aggressive cost-cutting measures banks are putting in place as digital technologies replace thousands of people from the back-office of their organisations.
Bloomberg Intelligence’s recent report predicts 200,000 middle and back-office jobs will be lost to artificial intelligence (AI), while Lloyds Bank’s branch announcement means more closures – and job losses – are inevitable.
One CIO in the UK banking sector, who wished to remain anonymous, said banks will push AI and branch closures as far as they can “before something breaks and they have to reverse a bit”.
“They always try to cut as many costs as they possibly can – and that’s basically people, buildings and computers, but they can’t cut computers because that’s the bit they’re relying on to cut buildings and humans.”
People, building and computers
The balance is shifting more towards spending money on computing and reducing costs on people and buildings, the CIO added. “With AI, they have got their teeth into it, and they’re thinking, ‘We can automate loads of stuff and save a load of money with branches, head offices or staff until it goes wrong’.”
Banks have been reducing their human workforce for years through branch closures as digital banking has taken grip, and the middle and back office at banks also face huge cuts as AI learns their roles.
This week, the reducing need for people within banks was highlighted – both overtly and covertly – through two announcements.
Recent figures from Bloomberg Intelligence put the number of jobs set to be replaced by AI at hundreds of thousands, with CIOs questioned by the organisation expecting on average 3% of their workforce on average to be cut. About a quarter of respondents expect the workforce to be cut by between 5% and 10% as AI takes over roles, with the back and middle offices to be most affected.
But it’s not just back and middle-office jobs in banking that will disappear – people working in branches face uncertain futures in the UK as big banks shutter branches across the country.
Although more covert and on a smaller scale, the announcement by Lloyds Banking Group that customers will be able to use branches at any of its three high street brands will inevitably lead to job cuts.
Lloyds Banking group has branches for its Bank of Scotland and Halifax brands as well Lloyds Bank. The ability for customers of all the brands to use any of the branches will give Lloyds an opportunity to close branches without removing access to banking on high streets. The reduction of branch numbers has been driven by the adoption of digital banking services
Jayne Opperman, CEO of consumer relationships at Lloyds Banking Group, told staff: “We know more people are choosing mobile over any other way to bank, but we also need to evolve how we support customers in other channels.
“That’s why – from later this year – we’ll make it possible for customers to use any of our Lloyds, Halifax and Bank of Scotland branches, regardless of brand they bank with, giving them access to the biggest combined branch network.”
High street traditional banks have been cutting their branch networks amid competition from digital-first banks. These challengers don’t have the huge cost of real estate and branch staff with services mobile and online. Traditional banks have invested heavily in the same online and mobile services and, at the same time, have been cutting costs through branch closures.
The rapid digitisation of banking and the increased use of technology by consumers to do their banking has meant job cuts, which followed the financial crisis of 2008, have continued. As long ago as 2009, union Unite described the strategy at the Lloyds Bank – then known as Lloyds TSB – as “death by a thousand cuts”.