Wall Street to cut 200,000 jobs as AI reshapes banking

Wall Street is bracing for a wave of job cuts as artificial intelligence transforms the financial services sector, with global banks expected to shed as many as 200,000 roles over the next three to five years. According to Bloomberg Intelligence (BI), the reductions equate to a 3% drop in headcount on average, with back-office, middle-office, and operational roles most exposed to automation.

Chief information and technology officers surveyed for the report, which included institutions like Citigroup, JPMorgan Chase, and Goldman Sachs, cited the growing adoption of AI tools as a key driver of the cuts. Tasks involving routine, repetitive processes are at greatest risk, with roles in customer service and know-your-customer compliance likely to be heavily impacted. While some predict steeper cuts of up to 10% of total headcount, BI senior analyst Tomasz Noetzel noted that AI would not eliminate these jobs entirely but instead transform them.

Banks have been modernising their IT infrastructure for over a decade, aiming to streamline operations and reduce costs in the aftermath of the financial crisis. The adoption of generative AI represents a new phase in this evolution, promising to boost efficiency while reshaping workforce requirements. Citi, in a report published in June, highlighted that 54% of jobs in banking have a high potential to be automated, the highest proportion of any industry.

Despite the disruption, AI is expected to deliver significant financial benefits. Bloomberg Intelligence estimates that the technology could lift banks’ pre-tax profits by 12% to 17% by 2027, potentially adding $180 billion to their collective bottom line. More than 80% of executives surveyed anticipate that AI will increase productivity and revenue by at least 5% over the next five years.

The changes are already being felt across the sector. JPMorgan Chase, one of the largest banks in the United States, has integrated AI into various functions, including risk management and client services. Teresa Heitsenrether, who oversees the bank’s AI initiatives, said in November that the technology has so far augmented jobs rather than replaced them outright. However, as the deployment of generative AI accelerates, the balance between augmentation and displacement may shift.

Jamie Dimon, JPMorgan’s chief executive, has spoken optimistically about the transformative potential of AI, not just for banking but for society more broadly. In an interview with Bloomberg Television in 2023, he argued that technological advances would lead to significant improvements in living standards, even if they result in some job losses. “Your children are going to live to 100 and not have cancer because of technology,” Dimon said. “And literally they’ll probably be working three-and-a-half days a week.”

The optimism surrounding AI’s potential for innovation is tempered by the challenges it poses for the workforce. While proponents stress that roles will be redefined rather than eliminated, the rapid pace of automation is likely to create uncertainty for workers in affected roles. Tasks once requiring human intervention are increasingly being handled by algorithms and bots, raising questions about retraining and reskilling.

Banks have argued that these changes are necessary to remain competitive in an industry under constant pressure to reduce costs and improve efficiency. The move towards automation is seen as a continuation of efforts to modernise and future-proof operations, particularly as technological advancements create new opportunities for growth.

Nevertheless, the scale of the anticipated job cuts underscores the transformative impact AI is expected to have on Wall Street. With productivity gains projected to reshape the financial services landscape, the industry faces a delicate balancing act: delivering efficiency and profitability while managing the societal implications of workforce displacement. For now, the promise of AI-driven growth remains intertwined with the uncertainties of a rapidly evolving labour market.

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