What happened when Robots invaded Norwegian banks?
Norwegian banks were digitalised in the 1990s. Management had high hopes of laying off staff.
A report published by American financial services company Wells Fargo in 2019 claimed that 200,000 American banking jobs will disappear within ten years.
The shockingly high number of proposed job losses is not the result of human-like robots marching onto the bank premises. The bots that take over these banking jobs come in the form of artificial intelligence and sophisticated software.
“All routine work will be automated in the long run. That is essentially what this is about,” associate professor Vegard Kolbjørnsrud at the Norwegian Business School tells sciencenorway.no.
Amongst other things, Kolbjørnsrud does research on digitisation and new ways of working.
But he is far from convinced that very many of the jobs in the Norwegian banking industry will disappear.
Norwegian banks are already automated
“The banking industry in Norway has already undergone very major changes,” Kolbjørnsrud says.
“Those who are old enough probably remember when they had to go to the bank to pay bills and withdraw money. Or even through the post,” he says. “But this is starting to be a very long time ago.”
A great deal of the daily banking activities are already automated in Norway, the researcher points out.
Most Norwegians now perform their banking services themselves through online banking. A lot of routine work has become obsolete in Norwegian banks.
The bank is always open
In the past, banks were usually closed. Now your bank is always open.
“Many of the simpler banking services related to payment services, credit cards, and applications for loans have become automated,” Kolbjørnsrud notes. “If you communicate with the bank, you’re often communicating with a chatbot.”
“In Norway, we have also achieved good integration between banks and public services. When you apply for a loan, you can easily give the bank permission to collect your tax report digitally”, he says.
This is done using a platform called Altinn, where individuals, the government and businesses can communicate and send each other documents. Norwegians log into Altinn for instance when they get their annual tax report.
To log in you use your personal BankID which allows for secure identification and signatures online. This system of online identification has been in use since 2004, and is now used by all the Norwegian banks and most government agencies.
Several such automated work processes have made the banking services much easier to perform, Kolbjørnsrud says.
He believes it is difficult to say how many more banking jobs will disappear in the years to come.
“But an important point here is that this process has already been going on for a long time in Norway.”
New jobs have been created
What do the bank employees who have not lost their jobs do now that their routine jobs have disappeared?
“Jobs do not simply disappear every time you automate something. New jobs are also created. Researchers have established that this is the case in several different international studies,” Kolbjørnsrud says.
Often, as many new jobs are created as those that are lost. It takes many employees with technical expertise to make the bots work.
“You also need people to work on constantly developing new digital services,” he adds.
You will meet even more bots
Vegard Kolbjørnsrud believes that in the future there will be even fewer people in the bank who you can contact directly, if you, for example, try to get in touch to report a lost debit card.
Instead, you will have to use a chatbot.
“What will remain is personal customer care for the most valuable bank customers,” Kolbjørnsrud predicts.
“Maybe in the future, there will be a need for more bank employees who can assist customers with more complex products and services. This is very lucrative for banks.”
Major changes in the 1990s
Pål Nygaard is also an associate professor at the Norwegian Business School. His field of study is history. Amongst other things, Nygaard has participated in professor Espen Ekberg's work researching the history of Norway's largest bank DNB.
“The study focused on DNB's history from 1990 to 2004. It was during this period that the most drastic digitalisation changes occurred,” Nygaard says. “The changes during this time were probably even more dramatic than what we will experience in the future.”
A ritual to withdraw money
“Some of the older generations can certainly remember that once upon a time there was a whole ritual around depositing or withdrawing money from a bank,” Nygaard says. “There was a marked difference between the bank employees who worked there, and the customers who entered the bank. Behind a clearly marked counter sat a uniformed employee who served you.”
Nygaard explains that because digitalisation would streamline this, DNB's management had high hopes for cuts in the number of employees and thus large cuts in costs.
However, there was only a slight decline in the number of employees.
“People did not lose their jobs. Instead, they were relocated. Many began working on selling new banking services, such as insurance,” he adds.
Excessive fear of robotisation
“In general, it has been shown that the fear of robotisation and massive job losses is not very well justified,” Pål Nygaard states.
“New technology instead often leads to inventing new tasks for people. Of course, we do not know what the future will bring, but there are many indications that this development will continue”, he says.
The historian recalls that the fear of automation in working life was perhaps even stronger two hundred years ago. At the time, many believed that the new steam engines, spinning frames and looms would mean that there were no jobs left for people. One hundred years ago, several new technological advances came and again many thought the same thing.
“We have experienced this fear time and time again,” Nygaard says. “But people are constantly finding something new to do in working life.”
Less money for employees
Norwegian researchers believe that the fear that jobs will disappear is exaggerated.
If you are still worried however, then of course there are others who can fuel your fears.
A study conducted by the Federal Reserve Bank in the USA finds that an increasingly smaller part of the money earned in the country goes to employees in banks and similar companies.
This is not just because the bots take over for the employees. It is also due to the fact that many who still have jobs in banking and finances in the United States believe their jobs are so threatened that they have become more afraid of asking for a pay rise.
Bots are becoming cheaper
The costs associated with software applications that take over the banking jobs are steadily decreasing.
In the last decade, these costs have been reduced by around 40 per cent, according to the consulting company Boston Consulting Group. The costs will only continue to be reduced.
It's not just the lowest paid bankers who are replaced by bots. Many high-wage earners who engage in stock trading are also being replaced.
Increasingly, it's the bots that do the stock trading these days.
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Translated by Alette Gjellesvik.
Read the Norwegian version of this article on forskning.no
Sources and references:
Forbes.com: “Wells Fargo Predicts That Robots Will Steal 200,000 Banking Jobs Within The Next 10 Years”, October 2019.
Espen Ekberg: "Radical change. DnB and the Norwegian banking industry, 1990-2004", Universitetsforlaget 2020.
