Some traditional banks are starting to automate using AI. The decision is already helping to cut costs and increase accountability, and while some of the capital saved will be invested in more automation infrastructure, a portion will go to redundancy payments for employees replaced by the “Digital Transformation”.
Could this strategy in finance provide a case study for how automation will change other industries, and how savings could be invested in basic income?
Dutch lender ING employs more than 50,000 people worldwide but warns that by 2021, bank automation technologies will replace about 7,000 full-time jobs.
The banking institution stated that the projected cuts will be mainly from the Netherlands and Belgium with 2,300 and 3,500 jobs, respectively. As a result, the company will invest €800 million over 5 years to satisfy a cost reduction program, and see a savings value of €900 million a year.
Why Bank Automation?
The group cites banking regulations and an extended period of extra-low interest rates as weighing on its financial returns.
The bailout offered to ING during by the Dutch Government during the heart of the 2008 Financial Crisis has definitely spurred change in the bank’s organization and operations.
As a result, the institution has chosen to invest €800 million in bank automation technologies to both cut costs and improve accountability and compliance.
The decision also allows the group to expand its activities and diversify its income, hopefully making future government intervention unnecessary in the event of a financial downturn.
“As financial institutions turn to digitization to improve efficiency and reduce costs, they are reorganizing themselves to refocus on investments without human intervention.”
Traditional Banking Is Shrinking
A wave of job cuts is sweeping over the financial world.
Banks used to rely on the collective intelligence of people to govern their core functions, but now they exist in the era of artificial intelligence.
After the second-largest bank in Germany, Commerzbank, cut more than 9,000 jobs, many others follow suit.
Furthermore, modern banking increasingly relies on high-frequency trading, which represents the biggest share of financial transactions. Therefore, as financial institutions turn to digitization to improve efficiency and reduce costs, they are reorganizing themselves to refocus on investments without human intervention.
This same trend is also occurring all over the financial network generally.
Online banking options and FinTech already automate basic teller processes like deposits and withdrawals. However, this trend is now being extended to more specialized functions: traditional financial institutions and decentralized banking platforms alike are entrusting more of the reception, consulting, decision making and support services to software.
As AI technology improves, computers are learning to do more than just execute – they’re learning to think. AI can now make limited decisions and perform tasks that require analysis and traditionally required human judgment.
The industry indicates that the future of banking belongs to those institutions who will appropriate automation technologies not necessarily across the board, but for the most integral functions.