Tasks that were previously performed manually, such as data entry, transaction processing, and customer service, are now being automated using artificial intelligence, machine learning, and robotic process automation. As a result, certain roles that involve repetitive and rule-based tasks are being replaced by technology, leading to job cuts in those areas.
For instance, JP Morgan’s Contract Intelligence program known as ‘COiN’ has been automating document review, saving the company 360,00 hours of manual work annually.
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As a result, jobs are being slashed left and right. Recent announcements from Lloyds Bank, cutting 500 jobs, and St James Place, closing two offices and laying off employees as part of a restructuring programme, reflect a broader trend. Companies are increasingly choosing technology over people to cut costs, all in the name of maintaining profitability amid a volatile global economy.
Investor pressure reshapes the industry
In response to economic uncertainty, market changes, and global conflicts, financial institutions are implementing cost-cutting measures to maintain profitability. Especially for publicly traded companies, layoffs are often a response to investor demands for profitability. Shareholders increasingly demand leaner operations and higher margins, pushing companies to streamline their workforce. According to a report from the World Economic Forum, four in 10 companies worldwide expect to reduce their workforces over the next five years.
Compliance costs are driving job cuts
Regulation is another factor weighing on financial institutions. As governments pile on compliance requirements, many firms find themselves spending more on systems, personnel, and processes to meet those demands. Instead of absorbing the cost, cutting jobs is often seen as the easiest solution. For example, following the implementation of GDPR, many financial institutions scaled back their staff to balance the increased compliance burden. In 2020, Citigroup cut hundreds of jobs from its traditional banking services to focus on more digital offerings.
The growing talent shortage amid the chase for profits
Meanwhile, the talent shortage is becoming a critical issue. The financial services sector is losing skilled professionals to more attractive opportunities in tech and consulting, particularly at fintech firms that offer flexibility that traditional banks cannot match. In response, some financial institutions are trying to fill the gap by partnering with universities and training providers. Unfortunately, that will not solve the bigger issue: the growing mismatch between the industry focus on profit-driven restructuring and the need for a talented, sustainable workforce.
AI takes the lead but do not fear
The misconception that AI will take jobs is misguided. While AI is indeed transforming various industries and may put certain roles at risk of automation, it is also creating new opportunities in fields such as data science, AI ethics, and customer experience design. The hype surrounding AI should be seen as a chance for financial services companies to invest in training programmes that help employees effectively use AI tools and remain competitive in the job market. In 2023, DBS Bank launched an initiative called “iGrow,” an AI and machine learning-powered platform designed to assist employees with their career development. By analysing this data, iGrow offers tailored recommendations for development opportunities, including access to over 10,000 courses provided by the DBS Academy and suggestions for job rotations or exposure to new roles within the organisation.
Yonja Ozbengu is an Associate Analyst in the GlobalData Thematic team
