Two recent announcements reveal just how aggressively banks are cutting costs as digital technology takes over roles once filled by people. A Bloomberg Intelligence report warns that AI could eliminate around 200,000 middle and back-office jobs. Meanwhile, Lloyds Bank is planning more branch closures, which will likely lead to job losses.
A CIO from the UK banking sector, who wants to remain anonymous, shared that banks are pushing AI and potential branch closures to the limit. They’ll cut costs wherever they can, focusing on reducing staff, closing buildings, and investing in technology. But they can’t cut back on technology, since that’s what they need to cut costs further.
The trend is clear: banks are shifting resources from human workers and physical branches to technology. The CIO noted, “With AI, they see the possibility to automate tasks and save money by shrinking their branches, head offices, and staff—until something goes wrong.”
For years now, banks have been downsizing their workforces through branch closures and are now facing significant cuts in middle and back-office jobs as AI systems learn to do these tasks. Recent data from Bloomberg Intelligence indicates that many banks anticipate job reductions, with CIOs estimating an average cut of about 3% of their workforce. Some predict cuts of 5% to 10%, especially in the middle and back offices.
But it’s not just the behind-the-scenes roles affected; branch employees face an uncertain future too, especially in light of Lloyds Banking Group’s announcement that will allow customers to use any of its three brands’ branches. This move will likely lead to job cuts, even if it’s not overtly stated. Customers of Lloyds, Bank of Scotland, and Halifax will have access to all branches, enabling closures without limiting banking access.
Jayne Opperman, CEO of Consumer Relationships at Lloyds Banking Group, acknowledged the shift in customer preferences toward mobile banking. She stated that the bank must adapt to support customers across various platforms. Thus, from later this year, customers will benefit from the largest combined branch network.
Traditional banks have been reducing branch networks as they face heightened competition from digital-only banks that don’t have to deal with the costs of physical branches or staffing. While these banks are scaling back on personnel, they’re also investing significantly in online and mobile services.
The rapid move toward digitization and the ever-increasing use of technology by consumers have contributed to ongoing job cuts since the 2008 financial crisis. Back in 2009, union Unite termed Lloyds Bank’s strategy as “death by a thousand cuts,” a sentiment that still rings true today.