Advancements in digital technology are bringing about major changes in the financial industry as middle and lower-end jobs are disappearing because of automation displacing clerical work since the beginning of the digital decade.
The ratio of officers to support staff has been impacted because of this change, going from 50:50 in FY11 to 74:26 in FY23. It is expected that artificial intelligence (AI) will further affect the availability of jobs in this industry.
In the foreword to the central bank's Report on Currency and Finance, Shaktikanta Das, the governor of the Reserve Bank of India (RBI), emphasized the difficulties posed by digital channels. Financial institutions need to invest in retraining and upskilling their employees to meet these challenges.
"Digitalization decentralizes financial labor through outsourcing and telework. Automation replacing labor has the potential to widen the gap between capital and labor returns, resulting in a fragmented labor market with low-skill/low-pay and high-skill/high-pay professions, while middle-tier jobs are displaced by technology," Das said.
The report also highlighted a global trend between 2013 and 2019, in which the number of support roles in the financial sector fell while the number of professionals and technicians climbed. This trend is also noticeable in India. Furthermore, the survey observed a turnover rate of more than 30% in private banks in FY23 due to hiring through digital platforms.
"The rising importance of AI-related skills in the labor market in India is reflected in the growth in AI talent recruitment relative to overall recruitment in 2023 (16.8%) and the highest relative AI skill penetration rate," reads the report.
Despite the emphasis on upskilling, the RBI pointed out that traditional learning and development approaches are inadequate for the current technological transition. Substantial investment is required to develop the necessary abilities.
In 2023, the central bank expressed concerns after leading private banks indicated that about a third of their employees had to be replaced due to excessive turnover rates, particularly among frontline field staff.
India is at the forefront of the digital revolution, with the Indian digital economy expected to account for 20% of GDP by 2026, up from the current 10%. Das remarked that digitalization is paving the way for the next generation of banking, improving access to financial services at more affordable costs.
"Digitalization is paving the way for next-gen banking and improving access to financial services at affordable costs," he said.
The cost of data breaches in India is also a major problem; between FY20 and FY23, it increased by 28% to $2 million. Cyber threats are still very common, especially phishing attempts and compromised passwords.
According to the survey, 22% of cyber threats are related to phishing attempts, while 16% are related to stolen or compromised credentials.
By investing in upskilling, addressing cybersecurity concerns, and adjusting to digitalization, the financial sector must overcome these obstacles.
