The Era of Technology
This is an era marked by technological advancements.
From smartphones to driverless cars, technology has opened the doors to endless possibilities. But of course, it also has its fair share of challenges – namely Automation vs Human.
Automation – an idea that is feared by the mass population.
There is an ongoing perception that with the development of robotics and artificial intelligence, it will replace all human labour; driving people into unemployment.
Pew Research Center conducted a survey in 10 countries, both emerging and advanced economies, and the research found that it is a widely shared view. Amongst the 10 countries, the outlook that automation is likely to transform our workplace has already begun.
Looking at the results, it does not matter whether it is an emerging or advanced economy, more than half the respondents fear of getting displaced.
This view is most prominent in countries such as Greece, South Africa and Argentina – 52%, 45% and 40% respectively. Workers in these countries strongly believe that they will definitely get displaced as a result of automation sooner, if not later.
Even more are convinced that automation will bring about more pitfalls than opportunities to workers.
Some examples being:
- Ordinary people will have a hard time finding jobs
- Expansion of the inequality gap between the rich and poor
- Very few better-paying jobs created
However, in this technology-driven world, the move to automation is inevitable, with capitalism as the main driver of this transformation.
Fast-forward to 2030
As of 2020, 50% of work that people are being paid to perform can theoretically be automated with the currently available technologies.
Based on McKinsey’s research into the impact of automation, 30% of the global work hours can be automated by 2030 depending on the adoption rates.
Even so, these are just predictions. There are many factors that come into play in deciding whether to automate or not. It also varies greatly on the country and sector as some are more susceptible to being displaced than others.
It would be a lie to say that people will not get oust at all.
By 2030, it is estimated that 400 million to 800 million people could be replaced by robots. Of the total number of individuals supplanted, 75 million to 375 million need to learn new skills and switch occupational categories.
On the bright side, though the threat of automation is real, it will eliminate very few occupations. It is more of a case of transforming the nature of work depending on the nature of the role.
Technical feasibility, also known as the percentage of time spent on activities that can be automated by adapting currently available technology.
Now if we look at the graph above, we can see that not all occupations are susceptible to being affected by automation.
It all boils down to the scope of work. Even if tasks are being automated, it doesn’t necessarily mean that the demand for that occupation will decline. Instead workers will just need to learn new skills and/or perform new tasks that can’t be automated.
There are a number of examples of the integrating automation into tasks but the overall demand for that occupation continued to grow.
One example will be the barcode scanner in supermarkets and retail stores. First introduced in the 1980s, it reduced labour costs per store by approximately 4.5%. Nevertheless, employment at supermarkets still grew at a constant rate of more than 2% between 1980 – 2013.
Why? Because cashiers were still needed. Scanners were just an additional tool to improve efficiency which translated into more sales.
What Kind of Work is Most Susceptible to be Automated?
The nature of work that is most and least susceptible to automation can be divided into two categories: works in predictable environments and works in unpredictable environments.
|Works in Predictable Environments||Works in Unpredictable Environments|
|Involves little to no complex skills||Involves complex and high value skills|
|Technical feasibility: 78%||Technical feasibility: 25%|
|Automation susceptibility: High||Automation susceptibility: Low|
|Examples: manufacturing, data collection and processing etc.||Example: people management, child care, plumbers etc.|
Generally, workers in predictable environments are more susceptible to automation leading to a larger displacement of workers.
59% of all manufacturing activities have technical potential for automation. Automation has evolved beyond just manufacturing activities. Activities like processing payrolls, calculating material-resource, administering procurement and using bar codes have already been automated.
Through machine learning and artificial intelligence, technologies now possess capabilities to transform sectors such as healthcare and finance.
Yes, though financial services rely on professional expertise and a substantial amount of knowledge. However, 50 percent of overall work hours are also spent on repetitive tasks such as collecting and processing of data. Thus, this set of activities can potentially be automated so that financial advisors can focus on higher value skills.
Shift in Skills Demand
With the acceleration of automation, the demand for workforce skills will shift in correlation. McKinsey launched a study projecting the demand of these skills by 2030.
The skills were split into five categories:
- Physical and Manual Skills
- Basic Cognitive Skills
- Higher Cognitive Skills
- Social and Emotional Skills
- Technological Skills
The top three that will be in high demand are:
- Higher cognitive skills
- Social and emotional skills
- Technological skills.
Despite being the smallest category today, technological skills are expected to grow by 55% by 2030 and will make up 17% of the working hours. Demand for social and emotional skills such as managing people and leadership will rise by 24% and make up 22% of working hours. Lastly, the demand for higher cognitive skills will grow moderately at 8% over the next 10 years.
On the contrary we’ll observe a decline in basic cognitive skills and physical and manual skills. These are considered lower value tasks that are repetitive and can easily be automated. Even so, they will remain the largest category of workforce skills as the rate of adoption varies between countries and sectors.
Shift in skills is nothing new, the skills requirement have constantly changed ever since the first industrial revolution. As technologies transform the nature of work across industries, job scopes will change accordingly. It opens up doors to a vast array of opportunities for people to explore.
“This journey of transformation can also be a journey of growth for our businesses and people alike” – Mrs. Josephine Teo (Singapore’s Minister of Manpower)
Zoom into the Financial Sector
The financial service industry is one where transformation brings about many opportunities. Many industry players have invested enormous amounts into new technologies. As a result, it enhances their competitiveness and operating capabilities.
Financial advisors are still spending a majority of their time on collecting and processing of data. These low value tasks can easily be automated with the help of AI and technology. With this, financial advisors can shift their focus to higher value work and ensure the delivery of highest quality service.
Some firms have already made the move to transformation, resulting in a shift in demand for workforce skills specific to the financial sector. As of 2018, the 5 most in-demand skills in the fintech industry are:
- Blockchain & Distributed Ledger Experts
- Programming Skills
- Machine Learning, Artificial Intelligence & Deep Learning
- Cybersecurity Expertise
- Soft Skills
Now if categorize based on the general five workforce skills it would come under:
|1.||Blockchain & Distributed Ledger Experts||Technological Skills|
|2.||Programming Skills||Technological Skills|
|3.||Machine Learning, Artificial Intelligence & Deep Learning||Technological Skills|
|4.||Cybersecurity Expertise||Higher Cognitive Skills|
|5.||Soft Skills||Social and Emotional Skills|
As expected, the demand correlates with McKinsey’s predictions. 3 out of 5 of the most in-demand skills are technology oriented with the other two requiring higher cognitive and social and emotional skills.
This just shows that the demand for lower value skills is becoming obsolete. Although some may perceive this as warning lights, others see it as an opportunity. An opportunity to automate low value tasks and focus on higher value activities.
Digital Transformation: Now or Never?
It does not have to be an either or situation, automation and humans can work together in harmony to deliver the best of both worlds solution.
Consider implementing a wealth tech solution that will enable your financial advisors to be more efficient. From Robotic Process Automation (RPA) to streamline your operational processes to Robo-advisors that will enable better financial advisory for your clients, the time for digitalization is now.
Leveraging technology to allow your advisors to focus on higher value tasks will lead to an improvement in their skill sets, further setting your organization and staff up for long-term success.
Don’t know where to start? Well look no further, Bambu has just the solution for you.
At Bambu, we specialize in developing Robo-advisory solutions for the financial services industry, from smaller RIAs and wealth advisors to some of the largest banks in the world. We help our clients work through the above key considerations to implement solutions that truly benefit their wealth management business.
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