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Global Bank employees will see massive job cuts and GCC region no different

200,000 banking staff are waiting to get the pink slip- Are GCC bank employees on the firing line as services move online?

Online banking penetration has reached 92% in the UAE banks and 85% in Saudi banks AI could reduce mortgage processing costs by 10% to 20%, the report said, while the use of big data and cloud computing could yield significant savings The banking industry spends $150 billion annually on tech

Wells Fargo has projected that up to 10% of banking jobs will be cut in the next decade, globally.

This region’s banking sector is getting ready to do the same.

According to the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf, some 40% of the GCC population is under 30, and young professionals are more tech-savvy, driving strong demand for digital services in retail banking.

Financial technology (FinTech) companies, which focus on lowering transfer fees and reducing transfer times, could significantly disrupt the money transfer operations of banks and exchange houses in the GCC, said global rating agency Standard and Poor’s (S&P).

“Online banking penetration has reached 92% in the UAE banks and 85% in Saudi banks,” found McKinsey, S&P reports.

To attract a young audience, Mashreqbank in Dubai and Emirates NBD’s Liv. have launched ‘neobanks’ that are 100% digital banks.

Something has to give. Traditional banking roles have to give way to more specialized digital workers and robotics/AI enabled versions of them.

A UAE Salary Guide published by Dubai-based recruiter Cooper Fitch said that technology roles within banking in areas such as data warehousing and cloud-based servers were in “high demand”.

Exclusive: What will spur and attract UAE investments and role digital banking plays

Banks are feeling the pressures

Michael Fahy, ZAWYA, reported last December, that a digitisation drive among banks is to replace routine roles with apps and artificial intelligence (AI)-enabled technology, something already underway in the UAE, with Standard Chartered and Mashreq Bank among the firms to lay off staff as a result.

Standard Chartered confirmed to Reuters that it was cutting jobs in its retail division as more customers migrate to digital services.

“Meanwhile, Zawya understands that Mashreq Bank has also recently laid off a large number of sales and call centre staff. The bank declined to comment on the number of jobs lost, but it said these posts were being replaced with “an equivalent number of relationship managers, product management and digital banking” roles,” reported Fahy.

Mashreq has been undertaking a digital transformation which has involved the creation of a new digital bank, Mashreq NEO, launched in October 2017.

Exclusive: For banks, digital transformation is no longer an option – It’s a survival mechanism

10% of banking jobs to be cut in the next decade

Advancements in technology will lead the banking industry to see a massive reduction in headcount over the next decade, with a projected 200,000 jobs cut, according to Wells Fargo estimates cited by Bloomberg.

AI could reduce mortgage processing costs by 10% to 20%, the report said, while the use of big data and cloud computing could yield significant savings.

McKinsey predicted earlier this year that the headcount of front-office workers will drop by almost 1/3rd with the rise of robots.

Wells Fargo recently announced 400 job cuts to its customer service centre following 120 layoffs earlier in the year, following an announcement from last year that it would reduce its overall headcount by up to 26,000 workers. Similarly, Citigroup CEO Mike Corbat said “tens of thousands” of call centre workers could be replaced by machines that “radically change or improve customers’ experience while cutting costs.”

 Back office, branch, call centre, and corporate employees are being cut by about a fifth to a third, whereas jobs in tech, sales, advising, and consulting are less affected.

Front-line branch employees have already been thinned out, and the new cuts are expected to be spread across branches and head offices.  

Among the jobs that the report says will remain relatively safe include the tech workers needed to keep the banking software running and secure. Other jobs less likely to be cut will be in sales, consulting and advising, the report says.

If a recession comes, banks will quicken the replacement of human workers with much cheaper technology.

Read: Alvarez & Marsal releases UAE banking pulse report for Q2 2019

Banking spend on tech

Betsy Graseck, global head of banks and diversified finance research at Morgan Stanley, sees JPMorgan Chase’s commitment to technology as a key driver of growth, as the bank is expected to spend $11.6 billion on technology this year, or 10% of revenues.

The banking industry spends $150 billion annually on tech — higher than any other industry in the US — which should ultimately lead to lower personnel costs. Major banks’ tech budgets are at a high: Bank of America and Wells Fargo had tech budgets of $10 billion, and $9 billion, respectively

Graph Bank budgets

Image courtesy of Business Insider Intelligence