75% of jobs in banking sector lost since 2000, digitisation mostly to blame

That is a scary fact, the Zimbabwe Banks and Allied Workers Union (ZIBAWU) reports that 75% of jobs in the sector have been lost since the year 2000. Is it any wonder then that many graduates cannot find jobs? Every year we have trained bankers to enter a sector with shrinking opportunities.

The chairman of ZIBAWU revealed the statistics but we should take note that the actual figure might not be 75%. See, ZIBAWU says membership to the Union was 12,000 in 2000 and is now down to 3,000 in 2023. A 75% decrease.

It’s important to note that not all bankers are members of the workers union, so the number of ZIBAWU members does not necessarily correspond to the total number of bank employees. This means that if the trend is that fewer people are choosing to join the union, the reported figure of 75% membership may be misleading.

In fact, I painstakingly went through the individual banks’ records and found that in aggregate, they have 7,685 employees. Yet, only 3000 are members of ZIBAWU, that’s 39% of all bank employees.

Despite the possibility that the interest in joining ZIBAWU may have declined, it is undeniable that there has been a substantial reduction in the number of bank staff. In fact, the total number of ZIBAWU members in the year 2000 exceeded the current total number of all bank employees.

Why the decrease?

ZIBAWU says there are two major reasons why banks employ fewer people today than they did in 2000. The first is an obvious one – the socio-political challenges the country has faced since 2000.

The ZIBAWU chairman used terms like “extremely difficult operating conditions” and “economy experiencing stagnation for decades” and I think we don’t need to go into that. You know what that means.

Then he said the major factor has actually been digitisation and automation efforts by the banks. Banks implemented online and mobile banking services, allowing customers to perform various transactions without visiting a physical branch, among another things.

As banks have digitised, they have needed fewer people and that’s just how the cookie crumbles.

How did digitisation cause job losses though?

1. Reduced Need for Manual Transactions: As digital banking services became more prevalent, there was a reduced need for manual, in-person transactions at physical bank branches. This led to a decrease in the demand for certain roles, such as tellers and customer service representatives.
2. Streamlining of Back-Office Functions: Automation of back-office processes, including data entry, record-keeping, and other administrative tasks, led to increased efficiency but also resulted in a reduction in the number of roles required to perform these tasks manually.
3. Shift in Skill Requirements: The implementation of digital technologies often necessitates a change in the skills required by the industry. The demand for employees with expertise in technology, data analysis, cybersecurity, and customer relationship management has risen, whereas traditional banking roles experienced a decline.
4. Branch Closures: Most, if not all banks chose to reduce the number of physical branches as customers increasingly use digital channels. This resulted in job losses for branch staff, including tellers, clerks, and other roles associated with in-person banking services.
5. Outsourcing: In some cases, some banks chose to outsource certain functions, including customer support or IT services, to third-party providers, which led to job displacement for in-house staff.
6. Job Displacement Due to Technology Upgrades: Upgrading technology and implementing new systems can lead to job displacement if existing staff are not adequately trained or if their roles become redundant with the introduction of more advanced automated systems. This happened to some unfortunate bank employees.

A familiar conversation

This is similar to the AI conversations we have had. Some jobs will be lost but some new ones will be created. Today, banks have larger IT teams than they did in 2000, I would guess, but significantly fewer tellers.

It appears that the new job opportunities created did not fully compensate for the lost ones. Which is what we would expect to see if you think about it.

My own question is, “Why has this drop in HR costs not been reflected in the pricing of banks’ products and services?”

You can discuss this but I think part of it has to do with greed, of course, but I would guess a major component of it is digitisation not done right.

Some banks are saddled with foreign systems and services that cost a lot, in USD no less. Yet, the same systems were not really made for an economy like ours and so have needed to be tweaked to no end.

So, the cost reduction that should have been observed with a shrinking employee base was not really realised.

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