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Pitches to save on staff to sell innovation to cautious bankers isn’t anything new. In the past, the outcome has reduced labour costs by increasing productivity. It’s not likely that the adoption of AI will be much different, writes John Turley-Ewart.Fred Lum/The Globe and Mail
John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.
That some Canadian bankers “toil,” as suggested in The Globe and Mail last Monday, surely surprises those who know the word’s tangible meaning – to perform laborious tasks over a long period. For much of their history, this country’s bankers found ways to wring toil out of their daily grind using new technologies.
They have had much success. Today they are investing in artificial intelligence to eliminate the last clerical and monotonous roles that past computing innovations left standing. More than that, they want to drive AI up the value chain for the highest-skilled to use, where new efficiencies generate fears about head count cuts. Analysts, auditors, portfolio managers and compliance officers are all looking over their shoulders.
Pitches to save on staff have long been an effective way to sell innovation to cautious bankers. And time and again, the outcome has reduced labour costs by increasing productivity, as opposed to reducing staff. There is little reason the adoption of AI will materially differ.
That banks are among the fastest to adopt AI is, in the context of Canada’s productivity crisis, worth commending. The Globe and Mail found that “more than 30 per cent of finance and insurance firms are using AI, compared with just 1.5 per cent of businesses in accommodation and food services.”
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Canadian bankers were often the first to adopt typewriters, carbon paper to copy documents and the use of files. These 19th-century technologies were the means to modern business management. They replaced an unreliable oral-based approach that generated wildly uneven results with, as JoAnne Yates described in her book Control through Communication, “the effective use of systematic communication in management.”
The capacity to efficiently “produce, reproduce and store documents” was the critical offshoot of this technology.
Rather than simply saving money, this technology better served making it. The Bank of Nova Scotia (Scotiabank today) BNS-T, for instance, was one of the first banks to implement customer files in branches in the early 1900s.
This supported the bank’s national expansion plan by allowing it to move bank branch managers to new locations with as little disruption to customer service as possible. A new branch manager could immediately pick up servicing a client where the previous manager left off.
One of the most important technologies adopted by our banks in their early days was mechanical accounting – what was soon called the adding machine. It entered business use in the late 19th and, especially, the early 20th centuries when new technologies were more rapidly embraced.
Adding machines such as the Burroughs really did offer relief to bank clerks from the toil of balancing ledgers by hand every night and doing the math in their heads. The adding machine materially changed banking in Canada and supported the rise of modern accounting methods through the audit trail the machines generated.
Lessons learned from embracing mechanical technologies a century or more ago nurtured a culture of early adoption, making it easier to jump into the more complex implementation of the first banking computing technologies.
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Tony Comper, former president and chief executive officer of the Bank of Montreal, played a critical role in introducing new tech into BMO from 1967 to 2007.
He explains the challenges in his book, Personal Account, where he tells the story of creating a real-time, online computer network and database in the 1970s that updated customer accounts instantly.
Mr. Comper recalls that the software was buggy and he endured constant anxiety about it failing completely, which drove him to always seek a backup plan.
Yet, real-time banking delivered immensely better service. So too did the adoption of Automatic Banking Machines in the same period. Fifteen years passed before ABMs were cost-effective. It also required tremendous effort to help customers become comfortable with the technology.
ABMs helped open the door to online banking when the internet took off. Every Canadian bank built websites and figured out how to offer customers access to everything from savings accounts to trading stocks and options online.
Through these innovations, bank employment has evolved with the changes technology facilitates. The same is true with AI. The Bank of Canada reported in May that there is no evidence that AI has led to widespread job losses in the country.
CIBC’s CM-T chief technology and information officer, Richard Jardim, told The Globe and Mail that with the use of AI, “there are different roles we see changing, where we either move people around, or we have them adjust the type of work they do.”
In another time, Mr. Jardim could easily have said the same about the bank adopting typewriters, adding machines and ABMs.