'Goliath Is Winning': The Biggest U.S. Banks Are Set to Automate Away 200,000 Jobs

Photo: Justin Sullivan (Getty)

Over the next decade, U.S. banks, which are investing $150 billion in technology annually, will use automation to eliminate 200,000 jobs, thus facilitating “the greatest transfer from labor to capital” in the industry’s history. The call is coming from inside the house this time, too—both the projection and the quote come from a recent Wells Fargo report, whose lead author, Mike Mayo, told the Financial Times that he expects the industry to shed 10 percent of all of its jobs.

This, Mayo said, will lay the groundwork for, and I quote, “a golden age of banking efficiency.” The job cuts are slated to hit front offices, call centers, and branches the hardest, where 20-30 percent of those roles will be on the chopping block. They will be replaced by better ATMs, automated chatbots, and software instruments that take advantage of big data and cloud computing to make investment decisions.

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“The next decade should be the biggest decade for banks in technology in history,” Mayo said.

It is not rare that a report forecasts the imminent erosion of an industry’s jobs picture, but it is a little rare that a prominent industry analyst for one of said industry’s largest companies is so brazen—even giddy—about trumpeting the imminent loss of those jobs. The think tanks and corporations that typically unveil findings like these are usually at least nominally worried about ‘optics’ or being diplomatic when they talk about such significant jobs elimination, but this is banking, I guess.

The analysis itself is also secondary—filled with buzzwords and promises of harnessing big data and predictive algorithms that may or may not pan out to be as effective as currently thought—it is the confidence and enthusiasm for this schema that is key, as that is what will transform the report into a self-fulfilling prophecy. If the banks buy what Mayo and Wells Fargo are selling, then the report will contribute to an automated arms race between companies to cut staff and purchase enterprise financial software products that is already underway. This is how a lot of corporate automation unfolds.

As a result, we can expect to interact with even more customer service chatbots and automated call menus (whether they work well or not), to see more financial decisions turned over to algorithms, and a continued flood of software products to enter the banking industry. And Wells Fargo certainly won’t be the only bank automating here: As the FT notes, Citigroup is planning to eliminate tens of thousands of call center workers, and Deutsche Bank expects to slash half its ~100,000-strong workforce.

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Mayo has been making the cable TV rounds, touting this incoming golden age of high-tech ultra-streamlined, automated banking, an age in which fleshy humanoid obstructions are finally smoothed out of the picture, making way for a purer, faster flow of capital from customer to banking executive. “This is fantastic,” he said on CNBC’s Squawk Box. “This should lead to record efficiency and market share gains by scale players, reflecting our theme, ‘Goliath is Winning,’” Mayo wrote in his report, and he says the same on the newscasts.

Insofar as a banking analyst can claim a catchphrase, “Goliath is Winning” is Mayo’s, and he says it often—about big bank mergers, about the dominance of Morgan Stanley, and so on. The point is that banks that scale, win. Banks that grow, merge, and leverage their scale win more. And banks that have already scaled up to a nearly incomprehensible degree will win the *most*, now by automating their staff and cutting labor costs across the board—allowing, of course, more of the earnings to flow upstream and be concentrated among an ever-smaller pool of people.

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In the context of hundreds of thousands of people being automated out of their jobs by corporate executives, “Goliath is winning” may seem more like the kind of thing you would expect a RoboCop villain to say. But it is also almost objectively correct. ‘Goliath’ is winning, squeezing out smaller competitors and smaller banks, and Goliath is also winning by replacing its human employees with instruments that direct capital more swiftly from us to it.

Now, in a just world, there would be ample safety net, health care, and employment alternatives for the tellers, call center workers, and front office staffers poised to lose their jobs, as many of them may find said jobs uninspiring. We don’t have all of those things in the U.S., of course, and the “greatest transfer from labor to capital” will leave a city-sized population jobless and struggling. On the consumer side, my concern is that we’ll be stuck, at least in the interim, with a host of frustrating automated customer service systems, and ever-fewer options when it comes to picking a bank as the margins of the massive players edge out the ones that can’t automate. It is, as ever, useful to remember to think about who automation is serving, and Mayo has made it rather explicit for us in this case—it’s Goliath.

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Also helpful is the ambiguity with which Mayo has painted in his automating Goliath. Goliath could refer to the banks themselves, which are ever-purer pools of capital, or it could be the elite c-suite executives at those major banking companies—they’re the chief beneficiaries of this automation, after all—or I guess it could just be capitalism itself.

In the current formulation, Goliath is winning, and 200,000 people are losing.

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