AI Workforce Shifts and Fintech Banking Expansion

AI: The cause and solution to life’s problems?

A bit like Homer Simpson’s observations about beer, AI appears to be both the cause and the solution to many of life’s problems. In the case of banks and AI, it’s the cause of job losses, and a reason to hire more people.

A Bloomberg survey of European bank leaders suggest that AI adoption will lead to more jobs in the short to medium term, rather than job cuts. “European banks’ AI buildout could see net headcount to rise 4% on average in the next three years, according to a Bloomberg Intelligence survey of senior executives at 57 global banks. That reflects lenders hiring engineers and data scientists to fully deploy the technology.” Executives expect job cuts to be mostly in the middle-office, operations-heavy jobs where there’s still a lot of room for automation of repetitive processes. And the leaders surveyed expect that AI will drive not only more hiring but a 6 per cent increase in revenue and an 8 per cent rise in profits. “That is likely a ‘ceiling rather than a base case, given thin evidence, uneven deployment and banks’ weak history of turning technology spending into productivity gains,’ according to Tomasz Noetzel, senior analyst at Bloomberg Intelligence.”

So what does this mean in practice? A story today about Citigroup gives some insights. Citi’s Head of Technology Tim Ryan says the bank is using AI to migrate data from legacy systems, and that it’s increasing hiring into its technology division. “He said the bank hired more software engineers and has a tech workforce of around 50,000 people,” reports Reuters. “Citi wants to rely more on internal staff as it increases investments in the development and deployment ⁠of  AI tools and wants to implement consistent AI tools across the company. A year ago, contractors made up around 50% of Citi's technology workforce and the bank planned to reduce that to 20%. The bank is ‘halfway through’ the plan to reduce the use of contractors, ⁠Ryan said,” reports Reuters. Citi is under orders from regulators to improve its risk management controls ⁠and fix regulatory data inaccuracies and governance. “Citigroup is choosing critical internal processes for review and automation,” said Reuters. “Among the first 50 processes are client and employee onboarding, as well as some ‘know your customer’ policies.” Ryan gave an example of AI-enabled onboarding that has cut an hour off the time to onboard new clients to the services division, bringing the time down to 15 minutes.

The revolutionaries are in the boardroom now

Upstart anti-Wall Street fintech business Robinhood has long prided itself as a disruptor of traditional financial services. Now alongside uber-establishment business BNY Mellow, Robinhood will be operating the US government’s savings scheme for children born between 2025 and 2028, known as the Trump accounts for children. That’s about as establishment as it gets. “For Robinhood, the mandate could reinforce its ongoing shift toward longer-term financial relationships as its user base matures,” writes Yahoo Finance. “The company, historically associated with the retail trading surge during the pandemic and more recently with prediction-market offerings, has been expanding into adjacent products including a premium credit card with a $695 annual fee and a closed-end fund aimed at giving retail investors exposure to private companies.” The fund is seeded by $1,000 from the government and can have $5,000 added per year with up to $2,500 coming from employers. The fund is being supplemented by a $6.25 billion contribution from Michael and Susan Dell. Will other countries take up the idea?

The latest fintech to get a bank licence is…

Payments processor Flutterwave has acquired a microfinance banking licence in Nigeria, marking the transition from fintech to bank. “The licence represents a significant expansion for Flutterwave, which has built its reputation processing payments for businesses across Africa,” reports TechNext. “The company has processed more than 1 billion transactions and moved over $40 billion in value, supporting more than 2 million businesses across a network connecting Africa to the world.” The licence will allow Flutterwave to lend, and with its oversight of real-time cash flows, it will be looking to disrupt the world of lending and offer financing to its small business customers. In January, Flutterwave acquired open banking startup Mono, which will allow it easier access to financial data, which it can marry to payment data. Founder GB Agboola acknowledged that the banking licence will bring higher scrutiny, writing that “operating at this level requires a higher standard. Stronger governance. Deeper oversight. More rigorous compliance.” Just as Paystack acquired a microfinance bank earlier this year, the route from payment services provider to bank is becoming well-established through the acquisition of microfinance banks.