NEW YORK: US banks could cut as many as 200,000 jobs in the next decade as they try to boost efficiency to compete with FinTech and other upstarts encroaching on their territory, according to Wells Fargo.
The eliminations are likely to accelerate as the economy reopens following the Covid-19 pandemic and conditions normalise, Wells Fargo analysts led by Mike Mayo said in a note, adding that “this will be the biggest reduction in US bank headcount in history”.Banks have little choice but to improve productivity in the face of stiffening competition from FinTech, technology and retail firms, he said, report agencies.
Non-banks offering lower-cost products online have steadily chipped away at the businesses of traditional lenders, with efforts intensifying over the past year as the pandemic pushed consumers to digital options. Earlier this year, Walmart lured a pair of senior Goldman Sachs Group bankers to run its fledgling FinTec start-up –a move that struck fear on Wall Street. Mainstream lenders have pleaded with regulators to halt efforts by retailers and start-ups to offer core banking products.
“Technology is impacting banking more than even before,” Mr Mayo said in an interview. “For banks, technology is both friend and foe.”
The moves will ultimately improve productivity as banks become leaner with less layers of management, Mr Mayo said. That’ll enable them to keep up with competitors, in a capital-for-labour swap that leads to 100,000 to 200,000 reductions over the decade.
“Goliath is winning,” Mr Mayo said. “The largest banks have more scale to deploy greater amounts of technology to better serve customers while becoming more efficient.”
Branches will likely continue to close, with many shuttered by the pandemic unlikely to reopen. Employment per branch will also probably fall amid more self-service options, Mr Mayo said.