Automation of financial services poses problem for labour market

A larger skills gap may prevent those displaced by the automation of financial services from finding another job as quickly as during previous industrial revolutions, a discussion between central bankers concluded today (September 6).

Speaking at Central Banking’s FinTech and RegTech Global Summit, central bankers acknowledged over 400 million workers, around 15% of the workforce, could be displaced by automation.

Fintech is quickly being integrated into a number of systems, streamlining payments, data assimilation and analysis, regulatory reporting and fraud detection.

An estimated 50% of time spent at work could be automated by adapting technology we already have, as argued by Adair Turner, chair of the Institute for New Economic Thinking, in April 2018. Introducing the effects of technology still in the experimental phase could push the number up still further.

Such disruption poses challenges for central banks. With technology arguably evolving at a rate faster than ever before, some central bankers fear the skill gap between those at risk of losing their job to automation has grown. Such an effect could inflict profound change on the structure of the economy.

During previous industrial revolutions, net job growth increased as people were retrained into new roles related to the governance of new technology. While the structure of the labour force changed, the size of the labour force grew.

Central bankers at the event in Singapore were concerned this trend will not apply to the latest technological revolution, given the larger skills gap. Unemployment could be a more serious problem this time around if people cannot keep up with the pace of change.

A report published by McKinsey in May 2018 suggested there is a digital skills mismatch between what companies need and the talent pools they currently hire from.

“Several countries report shortages of specialised information technology workers and data scientists,” the report says. For instance, France expects a shortage of 80,000 workers in IT and electronics jobs by 2020.

The gaps may also extend beyond to less sophisticated digital skills, with a report on the UK by polling firm Ipsos Mori finding 21% of the UK population in 2017 lacked “basic digital skills”.