Although the banking sector has played an outsized role in the U.S. economy for decades, thousands of frontline workers in the industry are likely to find themselves with a shrinking part to play as their jobs succumb to automation over the next few years, according to a report.
About 100,000 positions could vanish over the next five years as large U.S. banks invest more in digital banking and other technologies, Wells Fargo analysts predicted in a research note this week. Roles slated to disappear include branch managers, call center employees and tellers. Artificial intelligence, cloud computing and robots will play a larger role in daily banking functions like taking payments, approving loans and detecting fraud.
The disappearance of such jobs could parallel the massive contraction in manufacturing work in 1980s and ’90s, according to Wells Fargo.
“[O]ur conclusion is still that this will be the biggest reduction in U.S. bank headcount in history,” the analysts wrote, with job cuts accelerating once the economy fully recovers from the COVID-19 pandemic.
Consumers should expect fewer bank branches across the nation, and those that remain will likely shrink in size.
“Branches will likely show a decline, especially given greater digital banking adoption during the pandemic,” according to Wells Fargo. “Many branches that were closed during the pandemic will likely remain closed permanently [and] new future mergers will likely reduce branches, too.”
Big banks have continued grow over the last two decades, shrugging off the effects of the 2008 financial crisis after being bailed out by taxpayers. The financial sector accounts for 19% of the country’s gross domestic product, up from 13% in 2000. Despite that financial growth, between 2007 and 2018 the nation’s four largest banks reduced staff by a combined 300,000 positions.
To be sure, the banking industry has been shrinking for years as smaller and midsize banks are acquired by larger institutions.
“Bank consolidation is a long-term trend,” FirstBank CEO Jim Reuter told federal lawmakers in a congressional hearing on Wednesday. “In fact, it’s been part of the conversation for as long as I’ve been in banking. Whereas we had 17,886 banks in 1984, we have 4,951 today.”
Despite fewer physical branches and fewer bodies, Reuter characterized banking as a “diverse and highly competitive industry that helps to propel the U.S. economy every day.”
“Even though traditional teller positions and paperwork-heavy jobs in loan processing have declined, banks have hired new armies of technologists, cybersecurity experts, developers and data analysts,” he said.
The pandemic is speeding up automation in some sectors, especially in industries struggling to hire workers. The restaurant industry has been among the most visible adopters of robots and other tech, for instance.
While automation threatens the jobs of workers across ethnicities, research from management consultancy McKinsey found that Hispanic and Black Americans have the highest chance of job displacement. The Hispanic community is at risk of losing 25% of its job count, while Black Americans face a 23% displacement rate, McKinsey said. That compares to 22% for Asian and White workers each.
The Associated Press contributed to this report.