A recent post by @taskmaster4450le ponders Hiring Robots Instead of Employees. This piece sparked the idea that with DeFi, we are already seeing automation in the financial sector. Just like robots are changing manufacturing and other job sectors, finance is also getting a wake-up call.
Over the past three decades, we have seen traditional finance introduce some degree of automation. Automatic Teller Machines (ATMs) have been around for decades. But, they have not quite replaced bank tellers completely. Even with online banking, which wasn't a thing until the 1990s, bank branches have still been necessary for banks.
What Do Banks Do?
What services do bank branches provide? We can start with basic customer service. You stand in line to see a bank teller in order to deposit or withdraw cash. Or, perhaps you have questions about charges on your account. Perhaps you need to wire money or a cashier's check.
But, bank branches also have people who can help you with loans. These can be car loans, lines of credit, mortgages, personal loans, or business loans. Or, perhaps, there is a financial advisor on staff that can talk to you about your investments held at the bank. Maybe you need a credit card application reviewed by the branch manager because your application was declined.
How Banking is Being Automated
The simple answer is DeFi. DeFi is offering services such as trading, savings, lending, and insurance. First, however, let's just point out that crypto doesn't bother with physical representations. There are no checks that need signatures, your identification number, and other details for deposit. There is no cash. There are no deposit slips. No withdrawal slips. Tap, tap, tap. Transaction done. That's DeFi.
Trading is rather straightforward. You can swap one asset for another seemingly instantly with low commissions and minimal slippage.
Savings we often call staking. In order for locking in your asset somewhere, you earn interest.
Lending is the big game changer. In traditional finance, you go to ask for a loan because you are broke. You may have a small part of the total you need. So, you fill out an application, have it reviewed, submit some financial documents, talk to the loan manager, and hope that you get approved. If you get approved, then you sign a bunch of documents and wait to have the money deposited in your account.
With DeFi, loans are overcollateralized. At best, you can get 70% LTV on your crypto deposit. There is no paperwork, review, documentation, talking to a manager, or any of the inefficient nonsense. If you have collateral, you get a loan. A few taps and you're financed.
In fact, there is no difference between a personal loan, car loan, mortgage loan, or business loan. If you have collateral, you can borrow against it. In a crude way, DeFi filters out borrowers who shouldn't be borrowing. Instead, they should be saving to build up collateral.
DeFi doesn't care why, how long, or when you can borrow. You can borrow sitting on your toilet on a Sunday morning just as easily as you would during regular business hours at your office. Lines of computer code are indifferent to your appearance or need for the loan. If you have collateral, then you can borrow.
How Many Jobs?
So, how many jobs are eliminated with DeFi? All of these jobs, for the most part, hamper commerce. Every slip, every application, every decision-maker, and every form of documentation represents wasted time between your decision to conduct commerce and the execution of that decision. How many jobs are eliminated because crypto operates on immutable blockchains that can run code for basic financial operations?
Does code have to worry about quarterly reports, personnel reviews, attendance reports, and any number of bullshit tasks that your bank branch has to worry about?
On the flip side of that, having access to capital and the efficiencies of crypto, you can imagine that many more jobs will be created as a result of increased velocity of money. We will be able to iterate faster. We can settle transactions faster. And, we can profit (or lose) faster.
Perhaps there is a place for traditional finance in the future. But, it is going to have to change. Bankers hours will have to be a thing of the past. Whatever they end up doing will have to be done with fewer people and less hurdles for depositors.
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Jobs often shift and so we as people will either upskill or move into other industries. Plus there will always be a need for people to repair things.
In your example of an ATM taking a teller's job. Someone has to design/build the ATM machine, program it, service it etc... These were jobs that did not exist before, but do now.
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ATMs have been around since the 1980s or earlier, yet we still need to visit the teller desk to exchange paper money for rolls of coins and vice versa. There must be more to that task than a machine can handle!
If I recall what I learned in history class long ago, banks were originally set up as warehouses for assets (which included money). We would still need people for handling safety deposit boxes or vaults.
Even with cryptocurrency innovating people out of banking jobs, perhaps banking can be refedined to work along the lines of a concierge service, or more like American Express travel offices.
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Possibly, local branches could be subcontracted out. You would go to one branch to handle services with multiple banks.
Some credit unions already do that: as long as they're part of a network of credit unions, any authorized location can accept deposits for or handle withdrawals from accounts with any member credit union. If only regular banks worked that way.
For actual money handling, it's all-digital. For account creation or modification, some situations may still require a physical presence. For high net worth people, they may insist on doing business the old-fashioned way.
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Jobs are always a sensitive subject, but how amazing would it be if humanity could shift menial/tedious work towards automation that allowed the human workforce to focus on more useful/fulfilling jobs?
In other words, I'm eager to see what kind of creative changes companies make when employing automation. The cost-saving factor could allow for better pay and less mundane jobs.
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