Global banks may cut 200,000 jobs as AI takes over
What's the story
Global banks are expected to cut up to 200,000 jobs in the next three to five years as artificial intelligence (AI) continues to seep into the work done by humans.
Bloomberg Intelligence made the prediction based on a survey of chief information and technology officers.
The report indicated that an average net reduction of 3% in their workforce is expected due to the rise of AI.
Job transformation
Impact on banking sector jobs
Tomasz Noetzel, the Bloomberg Intelligence senior analyst who wrote the report, listed back office, middle office, and operations as the most likely areas to be affected.
He also mentioned that AI could change customer services and know-your-customer (KYC) roles.
"Any jobs involving routine, repetitive tasks are at risk," Noetzel said. But he stressed that "AI will not eliminate them fully, rather it will lead to workforce transformation."
Workforce predictions
Significant workforce reduction predicted by some respondents
The survey also found that nearly a quarter of the 93 respondents expect a deeper cut of 5% to 10% in total headcount.
The peer group surveyed by Bloomberg Intelligence includes heavyweights like Citigroup Inc., JPMorgan Chase & Co., and Goldman Sachs Group Inc.
The findings indicate sweeping changes in the banking industry as AI takes on an increasingly larger role in job functions.
Earnings boost
AI's potential to boost banks' earnings
Further, the report also projected that by 2027, banks could see pretax profits 12% to 17% higher than without AI — potentially adding as much as $180 billion to their combined bottom line.
The increase would be due to AI-driven productivity enhancements.
Eight out of 10 respondents expect generative AI to boost productivity and revenue generation by at least 5% over the next three to five years.
Modernization efforts
Banks' IT modernization and AI adoption
Banks have long been investing in modernizing their IT systems to speed up processes and cut costs after the financial crisis.
This trend has sparked a growing interest in the latest generation of AI tools that could further boost productivity.
A Citi report in June last year indicated that AI is likely to displace more jobs across the banking industry than any other sector, with some 54% of banking jobs having a high potential for automation.
Job augmentation
AI's role in job augmentation and quality of life improvement
Despite the potential job cuts, many firms stress that tech will change roles rather than wipe them out entirely.
Teresa Heitsenrether, who leads JPMorgan's AI efforts, said in November that their use of generative AI was so far augmenting jobs.
Jamie Dimon, JPMorgan's CEO, told Bloomberg Television in 2023 that AI is likely to greatly improve workers' quality of life even if it does cut some positions.