Remember the good old bank clerk who used to update your pass book? The fact that he is hardly seen these days explains banking industry's biggest predicament -- Automation.
On Wednesday, Vikram Pandit, who ran Citigroup during the financial crisis, endorsed this predicament with a disturbing figure. Pandit said developments in technology could see some 30 per cent of banking jobs disappearing in the next five years.
Artificial intelligence and robotics reduce the need for staff in roles such as back-office functions, Pandit, 60, said in an interview with Bloomberg Television’s Haslinda Amin in Singapore. He’s now chief executive officer of Orogen Group, an investment firm that he co-founded last year.
Though Pandit’s forecast was meant for US and Europe, Indian bankers are wary too.
“Look at the quintessential cheque book request, today 75 per cent of that happens digitally. Earlier, these customers used to walk into our branches,” Rajiv Anand, head – retail banking at Axis Bank, told ET. “There is increased automation within branches. We have more than 1,500 cash deposit machines, so why do I need a teller?.”
The Indian banking industry has been witnessing a slow transition from people-driven to machines controlled in the past few years. The technological development, which has made banking easier, has also led to a slowdown in the hiring of staff at banks. Although there have been hirings, the nature of skill sets required is changing with a lot more focus on the front end talent.
Traditional jobs such as passbook updating, cash deposit, verification of know-your-customer details, salary uploads are going digital increasing job redundancies. The likes of Axis Bank, ICICI Bank and HDFC Bank are pushing the boundaries of technology by implementing robotics to centralise operations and for quicker turnarounds in things like loan processing and selling financial products to customers. This is reducing the need for a manual worker at the back end.
A salary upload that we do monthly… today there are 5 people who are doing the job and this will get automated. The linearity at the back end —that as transactions go up the number of people should also go up —has been broken.”
“Low-end back office jobs like data entries will no longer be required in the next three years. The rate of growth of new jobs in the banking sector will definitely come down,” says Saurabh Tripathi, senior partner and director at BCG.
“Low-skill workers do not have a bright future. They will have to reskill or perish.” A sign of things to come is being witnessed at HDFC Bank, the country’s most valuable lender and the most expensive one among top lenders. The bank has not only been slowing branch expansion and hirings, it has also been reducing overall headcount even as it remains the gold standard of Indian banking.
It is not that we are asking people to resign and go away,” says Paresh Sukthankar, DMD, HDFC Bank. “Now we are saying while we will still add in certain areas as required, if based on productivity improvements you have people who are not gainfully employed in one particular function, you redeploy them in other areas. But after doing all that if we don’t have the need for a certain number of people, we will not hire as many.”
It's not just the private-sector banks, even the public sector is trying robotics to centralise operations and hasten turnarounds which reduces the need for manual workers. Soon after, HDFC Bank launched an electronic virtual assistant (EVA) a few months ago, State Bank of India (SBI), India's biggest public sector bank, too is testing a chatbot to handle customer queries and explain to them retail products and services. SBI Intelligent Assistant, SIA, might also be a modest beginning that can emerge as a wide phenomenon a few years later.
In future, SIA might handle real banking transactions as well.
Reeling under the burden of non-performing assets worth Rs 6 lakh crore, public-sector banks will have to resort to innovative ways to remain healthy. The government has launched a big merger exercise which would reduce the number of public sector banks to nearly six from 27. The mergers will not only reduce jobs but also disrupt unique work cultures in which employees have settled comfortably for long.
Due to these disruptions and challenges the public-sectors banks face, a banker's job might not be slow, steady or stable within the next 10 years.
Analytics and artificial intelligence are already being used by banks to do jobs once considered sacred, like underwriting loans. What this means is that human skills, which were considered imperative for basic banking not long ago, may not be required.“We are now helping banks to underwrite on the spot, which means the underwriting skills as we know it may not be needed,” says Piyush Singh, MD, financial services (Asia-Pacific), Accenture.
But it's not all that bad how Pandit has put it. Automation does not necessarily mean that there would no more be banking jobs. But they will be at a different level. Banks need to approach customers and educate them about financial products that are in the market.
“Footprint increase is not the number one priority in absolute branch strength. Increasing reach and distribution is our priority. Reach and distribution we will increase through digital and more feet on street and relationship managers of the bank,” says Shyam Srinivasan, CEO at Federal Bank.
The entry of new banks like small finance banks like Au Financiers, Equitas or Ujjivan would require an army of people as they expand to rural areas. Boots on the ground may be the mantra for these new banks which will have to marry technology with the human touch.
“Automation for us means improving productivity to ensure my employees can do more. 50 per cent of our loans has to be with a ticket size of less than Rs 25 lakh and 75 per cent priority sector. Our customers need hand-holding right from the application to the payment stage and we need people on the floor for that,” says Sanjay Agarwal, MD at AU Financiers, which commenced small bank operations earlier this year.
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