According to a bank analyst, US banks will cut 200,000 jobs, or 10 percent of the workforce, over the next decade to increase profitability in the face of changing customer behavior.
“This will be the largest decline in the number of US banks in history,” Wells Fargo analyst Mike Mayo told the Financial Times. If his forecast is confirmed, this year would mark a turning point for the US banking sector, where the number of jobs has remained roughly unchanged at 2 million over the past decade.
The jobs most at risk are those in branch offices and call centers as banks curtail their sprawling networks to adapt to the new realities of banking after the pandemic, Mayo’s report said. This is in line with statistics from the Department of Labor, which predict a 15 percent decline in bank clerk jobs over the next decade.
In the past, layoffs, especially in low-paying jobs, have been a controversial issue for the banking industry, often cited by progressive politicians as an example of a wealthy industry that prioritizes profits over people.
But the threat from tech companies and non-banks, who are abandoning the traditional bank-dominated payment and lending business, has increased over the past year and required job cuts, Mayo said.
“Banks have to become more productive to stay relevant. And that means more computers and fewer people, ”he said.
Most of the reductions can be achieved through attrition over the next 10 years rather than through cuts, 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 created just 266,000 jobs last month, falling badly short of estimates of 1 million. Structural elements of unemployment such as accelerated automation during the pandemic could pose more headwinds to a labor recovery than expected, business officials said after the report.
The pandemic increased headcount around 2 percent last year as banks hired staff to meet sudden demand for labor-intensive mortgages and government-backed small business loans. This trend is likely to reverse in the short term, however, as lenders return to focus on efficiency to compete more effectively with tech companies that increased their business share during the health crisis.
If I were to give advice to my kids, I would say that they probably don’t want to get into the financial industry
Increased competition from lightly regulated companies like PayPal and Amazon, which provide financial services, was a major concern of JPMorgan Chase CEO Jamie Dimon, outlined in his annual letter to shareholders last month. *
Mayo estimates that banks currently only make up a third of the total finance market.
“Digitization has accelerated, and some fintech and other technology providers have benefited from that,” Mayo said.
Many of the bank branches that were closed during the pandemic are likely to stay that way, and even those that remain open are likely to be less staffed as branches focus more on advising than on facilitating transactions. A large number of back office roles also need to be automated, but these numbers are harder to quantify, the report says.
Mayo said his team was twice the size and responsible for half as much 20 years ago. Doing more with less was the new industry norm.
“If I were to give advice to my kids, I would say they probably don’t want to get into the financial industry,” Mayo said, adding that technology and customer or customer-facing roles are probably the only areas that are growing is. “It’s probably a shrinking industry.”
* This story has been changed to indicate that businesses are regulated