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Types of jobs in banking expected to change with increasing adoption of artificial intelligence

Charles Beauchamp

John Oxford

By BECKY GILLETTE

A hot topic in banking circles is how much artificial intelligence (AI) will impact employment in the banking industry. One study reported in American Banker magazine predicts that 70 percent of front-office jobs will be replaced by chatbots, voice assistants and automated authentication and biometric technology. And steep job losses are also predicted for financial management, compliance officers and loan officers as those functions are replaced by AI applications for anti-fraud, compliance, monitoring and anti-money laundering.

Adoption of AI and machine learning (ML) could also be very profitable for banks. Some researchers have estimated it could increase the revenue of banks 34 percent by 2022. But will that come at the cost of job losses for many employees of banks?

John Oxford, senior vice president and director of marketing, Renasant Bank, Tupelo, said he doesn’t think bank employees should fear for the future.

“Throughout the history of business, there is always transformational change,” Oxford said. “The fear of jobs evaporating tomorrow is a little overhyped. The worry of a job being taken is way over played because the jobs are just going to transition. You will now be working more in data processing, IT security or providing a customer service experience that is more interactive than from a digital standpoint.”

Oxford predicts the types of jobs will change; there will be a re-education and retooling within the workforce.

“The jobs of tomorrow will be much more technology based than they are today, but there will still be jobs,” Oxford said. “If we go back in history, from what we do digitally in banking, ten years ago people weren’t going to coding schools and learning to build apps. Hands on today might be digital interactions tomorrow. But someone has to be able to work those jobs.”

While AI can do a lot of functions previously handled by a person, Oxford said a lot comes down to a customer’s preference. Some people prefer to never enter a bank and do all their banking digitally. Others want interaction with bank employees.

“Some people don’t feel confident with digital,” Oxford said. “They want someone to walk them through their transactions. Banks on Fridays are pretty packed with people needing services. While there are more efficient ways to do banking, some people are not willing to do that. It comes down to client preference. Some clients want interaction and relationships. Some want just a digital relationship. To be a quality bank, you have to meet the demand on both sides.”

Chevis C. Swetman, president and CEO of Peoples Financial Corp., Biloxi, has seen a lot of changes in the 48 years he has been in banking.

“The big thing is most people are afraid of technology,” Swetman said. “You can’t be afraid of technology. It is going to make everybody’s life so much easier. People just need to take advantage of it. It is hard to teach an old dog new tricks, but the new tricks are here to stay.”

Swetman has pondered why people should bother to drive to a bank and go through the drive-up window.

“If I had to build another bank or branch bank today, I doubt I would put a drive-up window there. It is changing the nature of the business,” Swetman said. “So, realistically, technology can cut people’s jobs and save money. But what are you going to do with the employees at your 18 branches who have been there five, ten or 20 years? Are you going to fire them? Not a chance. You take those people and retrain them as personal bankers. Have them be able to provide information on loan products and Certificates of Deposit.”

Swetman said people who have been specialized in one job will now need to be trained to three of four jobs.

Automation is both a threat and an opportunity for the industry, said Dean Ken B. Cyree, Ph.D., University of Mississippi School of Business Administration.

“Since Mississippi has relatively small banks and most are community banks, there is concern about competing with large, out-of-state banks that are in some cases more automated, or could have the resources to become more automated,” Cyree said. “I believe the customer relationship and service parts of the industry will be valuable to customers in the future, regardless of the automation and artificial intelligence opportunities that emerge. While lending commodity-type products, such as insured mortgages, are tailor-made for efficiencies due to automation, other more non-standard loans are still very likely to be made by experienced bankers.”

Cyree said small business loans, at which community bankers excel, are a good example since it is difficult to model all the factors a banker must consider. He said lending is part science and part art, and the ability to add value to the customer through the art of lending will likely never go out of style.

“Some customer service functions could be even more automated in the future, and, in many cases, this will create faster and accurate service,” Cyree said. “But, in contrast, some customers will desire human interaction when making financial decisions and transactions. I continue to be optimistic about the future of banking, and I believe automation will add to the efficiency of the industry, and hopefully allow bankers to focus on what customers need to be successful.”

Right now, the only banks investing major amounts in AI are megabanks, said Charles Beauchamp, Ph.D., CTP, a professor of finance at Mississippi College in Clinton.

“They are the only ones who can scale it because it is expensive,” Beauchamp said. “I think where the real danger in moving forward is non-bank companies actually developing AI where some of these banks could farm out some of their operations to those companies. That would have a big impact on employment in banking.”

Beauchamp sees the biggest threat in employment in back office operations.

“Now, how far out on that we are, I have no idea,” he said.

Beauchamp said the biggest obstacles in using AI to make loan decision is judging someone’s character. There are five Cs in credit: collateral, capital, capacity to pay, conditions and character. How does AI judge character?

“Community bankers live for relationships and so do some of the regional banks,” Beauchamp said. “You may have marginal borrowers whose credit score is not great, but the banker will decide to make the loan based not completely, but largely, on character.”

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About Becky Gillette