Robots Are Heading To Your Compliance Department
Technology is rapidly invading the financial sector in many shapes and forms. Just as we noted in the ComplianceX Newsletter on Friday, the fastest growing skill among the top U.S. banks is in technology and now an astonishing one in 10 Goldman Sachs employees list Python (a coding software) on their LinkedIn profiles. The trend reaches nearly all industries replacing manual work with technical algorithms, and now the trend is headed for your compliance department.
This phenomenon is called ‘regtech,’ which is the management of regulatory processes within the financial industry through technology. Banks are looking into whether compliance officers can be effectively eliminated by technology or not for what might be the most bulky and manual operation banks have to deal with.
The latest Bain & Company report noted that at most major banks, compliance costs about 15-20% of operational costs and about 40% of transformation costs, while a JWG and Marklogic report puts the cost of compliance at 4% of revenue (set to increase to 10% by 2021). Banks could save a great deal of revenue by replacing compliance departments with robots.
On the other hand, proper compliance is priceless. In comparison, a robotic compliance officer would be akin to a robotic police officer. There are a lot of morally and ethically gray areas that make banks hesitant to leap into the regtech arena. Accountability is key, and you can’t throw a robot in jail.
Investing In New Employees Or Robots?
Not only should compliance officers be wary of robots replacing them, employees in banking jobs such as customer-service reps, financial managers, and loan officers are also on the list for robots to replace.
Despite being popular places to work for employees, banks are already investing heavily into technology that’s predicted to wipe as many as 1.3 million jobs away within the financial sector by 2030, according to a report by British insights firm IHS Markit. In shorter terms, technology could displace about 10,000 employees within the next five years.
As banks invest and develop these technologies, they will save money in the process and ultimately invest more into it — thus eliminating more jobs. It is predicted to add a staggering $512 billion in global revenue by 2020, according to a 2018 report by Capgemini.