When talking about artificial intelligence, people can refer to the many innovations that have helped society while others tend to focus on how harmful it can be. Recently, an article that was featured in The Japan Times focused on how AI could be killing banks in Japan. This alone is a frightening thought. However, if artificial intelligence is proving harmful to their banking system, could this spread to where it could destroy the banking system in other countries?
There has been an ongoing series in Japan where the Asahi Shimbun published an article on January 11th where it seems the financial industry has utilized artificial intelligence more than in other fields. The importance of this has to do with how advanced voice recognition is progressing to the point that potential customers and clients can avoid discussing their financial needs with a human being; after all, if an individual is set to make a final choice regarding a transaction, much of the work has been done already.
However, this development could quickly lead banks to no longer being needed. Japan’s banking policies have made it so domestic banks are unable to make cash on loans, this has led them to become clearinghouses for products of other financial companies such as insurance policies or mutual funds. Since banks can be considered as salesman that collect fees for handling of services and delivering products, as soon as this task becomes automated or rendered obsolete due to new technology, what then is the purpose of having a bank anymore?
Creativity Doesn’t Alter the Facts
Although many in the financial sector would scoff at such a thought, more types of these stories were being covered by the media in recent weeks, which included Asahi’s affiliate weekly magazine, Aera, where their January 22nd issue mostly focused on Japan’s banking system was coming to an end. These articles appeared to be a result of three Japanese mega banks in recent months making announcements that over the next decade, would be terminating a substantial amount of jobs: Sumitomo Mitsui Financial Group ending 4,000, Mitzuho Financial Group terminating 19,000 and Mitsubishi UFJ Financial Group closing 9,500 positions.
The lead feature for Aera was titled Seven More Years for Banks and the article starts off with a scene that occurred on October 28th at a branch of Mizuho. Being alarmed by the staff cuts that were presented by the media, employees confronted a manager to which the response was that the reductions would occur through natural attrition; this means through the dwindling university recruitment targets and scheduled retirement. However, this did not mean that current employees would be terminated. Regardless of how the manager explained it, the bottom line is many workers would be phased out within a decade.
This is a red flag for younger employees at banks to possibly seek new positions while at an age that makes this possible by trying another firm and working their way up to a higher pay rate. However, one article suggests that despite the perks and a higher salary that is associated with a position in banking, bankers are realizing more and more that there isn’t a guarantee they will wind up in the so-called elite course position in management they expected to be in. What is worse, they feel a lack of control of what their future may hold.
What Does the Future of AI Hold for Banking?
Those who feel what is happening in Japan is no concern for others that live elsewhere, think again. The United States banking system is just as vulnerable to artificial intelligence replacing human employees considering how automation has already taken over many positions once held by individuals. While AI innovations have proven helpful in many fields, including banking, it is important to realize that it is extremely possible that society is moving in the direction that artificial intelligence could destroy the banking system as we know it today.