With various investment firms curtailing or shuttering lines of business, particularly in debt trading, contractions have led former bankers to quit finance and put their experience to use in a new field, financial technology (fintech for short). By capitalizing on the changing regulatory environment, these companies offer risk management, data analytics, trading platforms and various other services, many of which were once performed by humans. More and more bankers have been looking for jobs in technology, a trend that was virtually nonexistent just five years ago.
In January, North America had 212,100 fewer bond brokering jobs and other roles as defined by the US Bureau of Labor Statistics as credit intermediation compared from the start of 2008. This is in contrast to the currently more than 500,000 job openings in such areas as software development and cybersecurity, many of which didn’t even exist a decade ago. An annual review of the US banking system by McKinsey & Co back in December counted over 12,000 startups focused exclusively on banking businesses. According to data compiled by Bloomberg, four of the biggest US and UK banks have reduced total headcount by almost 350,000 since the start of 2008. And many seem to believe that the banking industry will continue to cut jobs this year.
Even across the Atlantic Ocean, the banking industry seems to be getting smaller. Deutsche Bank has been trimming compensation and shrinking its credit unit while also conducting a strategic review to identify further cost savings. At the end of 2012, UBS announced a plan to cut 10,000 jobs and retreat from some trading businesses where profitability was hampered by stricter capital rules. Technological advances are expected to have a massive impact on the banking industry. According to McKinsey, more than 30 percent of revenues at European banks will be driven by digital transformation in the future. If a process is measurable or mechanical, then it can be automated, and it definitely will.
Last year, banking and securities firms spent an estimated $488 billion, an amount that’s expected to top $500 billion this year, as foreign-exchange rigging scandals put electronic messaging under the spotlight, and after hackers jeopardized millions of JPMorgan Chase & Co accounts last year. Chances are that technological progress is going to leave behind a lot of people, as many ordinary skills and abilities are being acquired by computers, robots and other digital technologies.