A bank without clerks, without advisors, economists? It may seem like a scenario from a distant future, but financial institutes such as UBS are putting resources into the development of such scenarios, to prepare for how a bank may work in a digital world.
Last week, two big players of Europe's banking world left their employees pondering their personal future with two completely independent statements. Statements, which in fact were intrinsically linked by their content: Deutsche Bank Chief Executive John Cryan said building a more efficient IT would yield huge savings, making back office staff worrying about their jobs.
Meanwhile, at the «ICT Skills 2015» in Zurich, an IT roadshow, UBS Chief Information Officer Daniel Ott (picture) said: UBS is working on the question whether it was possible to operate a bank without human beings.
The thought seems logical enough: If Google and Toyota are capable of making cars that don't require a driver with help from big data, cloud and other technological solutions, banks should be able to do the same, and make people dispensable.
But of course, the question to ask is equally logical: does UBS really want that? A spokesman for Switzerland's biggest bank puts Ott's statement in perspective: The bank without human beings is a scenario studied by think tank UBS Y.
Automatic Banking
UBS Y's task is to study the trends of the coming three decades and as such the effects of the technological progress on companies and the degree of automation. «The people at UBS Y are not bankers and as a think tank charged to fundamentally question the structures. As such they need to be able to consider scenarios without restrictions,» the spokesman said.
The automatic bank, guided by intelligent algorithms is of course already a reality, albeit in certain niche segments of the financial market: Online brokers only need a fraction of the people of a traditional institute. Robo-advisors are able to managed billions of dollars of thousands of customers. Fintech and the use of Blockchain technology would render obsolete entire units at banks.
Cutting Back Office Jobs a Trend
The sacking of banking staff, replacing them through more and better IT and digital procedures is already a reality. Asset Manager GAM in August said it will cut 15 percent of its workforce.
The bookkeeping of funds will be done by State Street, where procedure are largely automated already. GAM Chief Executive Alex Friedman told finews.ch that this was part of a larger trend in banking.
The highly-paid fund and portfolio managers are facing an emerging competition from passive asset management products, designed by software. That's pretty much how Truewealth, Nutmeg and Wealthfront, digital private banking firms, are operating.
The Right Balance
Computers allocate assets based on huge data libraries and based on the profile of customers. Human beings are used sparingly.
The preeminent school of thought in private banking however is that wealth managers can't be replaced by machines. UBS may be thinking about a bank without humans, but the experts concluded that «technology supports the advisor at the bank, but can never replace him,» according to the spokesman at the world's top wealth manager.
«The advisor is a key element of an asset management.» UBS Advice however shows how narrow the room for manoeuvre for the advisor has become. The machine gives the suggestions for the asset allocation, which the advisor then can discuss with the client.
Productivity Gains
The progress in communications technologies has made banking even less dependent on human interaction than it already was. Customers can open accounts digitally (not yet in Switzerland though), invest their money online, pay and transfer via e-banking, organise a credit over the internet.
The intelligent bank branch, «smart branch» is a reality: At some high street branches of Raiffeisen, customers are being welcomed by virtual advisors on giant screens.
Industries have always been shedding parts of their workforce – productivity gains in a capitalist society. 150 years ago, half of the population was working in agriculture. Today fewer than 5 percent.
Not a Scenario - Reality
The future in banking entails a huge potential to cut costs by replacing humans with computers – hard as it may sound. Depending on the segment the bank is active in, up to half of all employees are charged with administrative tasks.
UBS without human beings may be a scenario thought through by a think tank only. UBS – and many others banks – with substantially fewer employees however is a scenario, which already is the trend in the industry.
