Wall Street might cut 200,000 jobs due to AI (13.01.2025)
It’s official: no industry is immune to the transformative power of artificial intelligence, and the financial services sector is no exception. AI is poised to revolutionize banking operations, potentially displacing a significant portion of the workforce. For centuries, humanity’s greatest innovations have not replaced humans but enhanced our capabilities. Automobiles extended our mobility; computers amplified creativity; and now, AI is elevating human intelligence to new heights. A recent Bloomberg Intelligence report estimates that AI could result in approximately 200,000 job cuts in global banks over the next three to five years. The most affected roles? Those in back-office, middle-office, and operational departments—areas dominated by routine, repetitive tasks. Jobs involving data analysis, financial trend assessments, and risk evaluations are particularly vulnerable, as AI systems excel in processing massive datasets and generating insights far faster than humans. However, this isn’t the end of the human workforce in finance—it’s a transformation
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A survey of chief information and technology officers from 93 leading financial institutions, including JPMorgan, Citigroup, and Goldman Sachs, projects an average workforce reduction of 3%, with some institutions anticipating cuts as high as 10%.
Tasks perceived as simple or repetitive are at the highest risk of automation, including customer service functions and know-your-customer (KYC) processes. Yet, many roles are expected to evolve rather than disappear, with AI augmenting human capabilities.
Financial Implications
The financial upside of this transformation is substantial. By 2027, banks could see their pretax profits rise by 12% to 17%, adding an estimated $180 billion to their bottom line. Additionally, 80% of surveyed executives anticipate that generative AI will boost productivity and revenue by at least 5% within the next three to five years.
A Case Study in Transformation
Klarna, the Buy Now, Pay Later (BNPL) giant, offers a glimpse into AI’s impact (read the article ’Klarna replaces 700 human agents with ChatGPT as it prepares for a $20 billion IPO’). CEO Sebastian Siemiatkowski recently announced a hiring freeze due to AI-driven efficiency gains. Similarly, JPMorgan continues to lead the pack, leveraging AI to enhance operations and maintain its competitive edge (read the article `JPMorgan is leading the way in the adoption of AI in banking (01/2024)`).
Reskilling for the Future
The integration of AI in finance represents both a challenge and an opportunity. While traditional roles may be displaced, new ones are emerging. Financial institutions are shifting their workforce priorities, emphasizing skills in computer science, statistics, and data analysis. Future roles may focus on AI oversight, ethical considerations, and strategy development.
This transformation highlights the importance of reskilling. Workers must embrace lifelong learning, adapting to roles where human judgment and creativity remain irreplaceable.
The Road Ahead
AI’s integration is accelerating key trends in the financial sector:
- Workforce Composition: Routine tasks will be automated, while new roles centered on AI oversight and strategic planning emerge.
- Education & Adaptability: Continuous skill development will become a necessity for career longevity.
- Industry Consolidation: Banks investing in AI will gain competitive advantages, potentially reshaping the financial services landscape.
- Hybrid Models: Expect a blend of AI-driven efficiency and human-led relationship management and complex decision-making.
The success of financial institutions will increasingly depend on their ability to strike a balance between technological automation and human ingenuity.
AI Won’t Replace You, But Someone Using AI Will
The numbers can feel daunting: The World Economic Forum predicts that AI will displace 85 million jobs in the coming years. Yet, it also forecasts the creation of 97 million new roles.
The message is clear: AI isn’t just replacing jobs—it’s transforming them. Take JPMorgan as an example—AI is enabling employees to focus on high-value tasks, enhancing productivity rather than eliminating roles entirely.
The takeaway? Fear won’t help, but preparation will. Embracing AI, adapting your skills, and remaining open to change is the key to thriving in this new era of finance. Thriving in this new era of AI hinges on one crucial mindset: embracing lifelong and continuous learning. By adopting a proactive approach to learning, individuals can position themselves as indispensable assets in the workplace. The key is to focus on areas where human judgment, creativity, and interpersonal skills are irreplaceable, while also gaining enough technical knowledge to collaborate effectively with AI systems.
The message is clear: the future belongs to those who adapt. Fear won’t help you, but preparation, fueled by a commitment to lifelong learning, will open doors to new opportunities. The combination of AI’s potential and your willingness to learn could unlock a career that’s not just resilient but also rewarding in this new era of finance.
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At ECEBiS you are going to understand what will change the trajectory of the financial industry. You will develop a transversal view on the forces that are shaping the future financial industry.
From payments and lending to investment and money management, tech providers are actively shaping the future of the financial landscape - even pushing the boundaries of currency itself. You might evaluate the impact of robo-advising on health management and examine portfolio recommendations from a diversified set of RAs and attempt to identify the factors behind proposed splits between asset classes.
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Doctorate of Business Administration (DBA) in Finance (online, 3 years part-time)
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raise awareness on the importance of fintech and sustainability in finance
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