According to a banking analyst, US banks are expected to cut 200,000 jobs, or 10% of employees, over the next decade as they maneuver to increase profitability in the face of changing customer behavior.
“This will be the biggest US bank downsizing in history,” Wells Fargo analyst Mike Mayo told the Financial Times. If his forecasts hold true, this year would mark an inflection point for the US banking sector, where the number of jobs has remained roughly stable at 2 million over the past decade.
The jobs most at risk are those in branches and call centers, as banks prune their sprawling networks to match the new realities of post-pandemic banking, according to the Mayo report. This is in line with statistics from the Ministry of Labor which predict a 15 percent drop in bank teller jobs over the next decade.
Historically, layoffs, especially for lower-paying jobs, have been a controversial issue for the banking industry, which is often presented by progressive politicians as an example of a wealthy industry prioritizing profits to people.
But the threat that tech companies and non-bank lenders will shrink the payments and lending industry, which has traditionally been dominated by banks, has intensified over the past year, making job cuts necessary, Mayo said.
“Banks need to become more productive to stay relevant. And that means more computers and fewer people, ”he said.
Most reductions can be achieved through attrition over the next 10 years rather than reductions, which reduces the risk of backlash, Mayo said.
The new study, first reported by the FT, follows disappointing employment data that showed the US economy added just 266,000 jobs last month, clearly missing estimates of 1 million. Structural elements of unemployment like the accelerated automation that took place during the pandemic could create stronger than expected headwinds for a return to work, economic officials said following the report.
Pandemic activity has boosted headcount by around 2% last year as banks hired staff to meet sudden demand for labor-intensive mortgages and secured small business loans by the government. But that trend is likely to reverse in the near term, as lenders refocus on efficiency to more effectively compete with tech companies that increased their share of business during the health crisis.
Increased competition from unregulated companies such as PayPal and Amazon entering financial services was one of the main concerns of JPMorgan Chase CEO Jamie Dimon described in its annual letter to shareholders last month.
Mayo estimates that banks currently represent only a third of the overall financing market.
“Digitization has accelerated and this has played on the strength of some fintech and other technology providers,” said Mayo.
Many bank branches closed during the pandemic are likely to remain so, and even those that remain open are likely to be less staffed, as branches will focus more on providing advice than facilitating transactions. A lot of back office roles also need to be automated, but those numbers are harder to quantify, according to the report.
Mayo said 20 years ago his team was twice as large and responsible for half as much. Doing more with less was the new standard in the industry.
“If I were to give advice to my kids, I would say you probably don’t want to get into the financial industry,” Mayo said, adding that technology and client or client roles are probably the only areas that will experience a growth. . “It’s probably a declining industry.”