The impact of digitalization and automation on jobs market and skills development in Pakistan's banking sector

Abstract

Pakistan's banking system is an example of rapid digitalization and automation due to Artificial Intelligence (AI), Robotic Process Automation (RPA), Blockchain and Mobile Banking. Due to the benefits these technologies introduced to banking systems, some challenges are caused concerning the stability of employment and the development of skills among the workforce. This research aims at studying the effects of digitalization and automation on employment and skills development in the banking system of Pakistan. This study uses workforce flexibility (as a mediating variable) and corporate training initiatives (as a moderating variable). A mixed-methods concurrent triangulation design was employed, and surveys were administered to 383 banking professionals from conventional and Islamic banks located in the Islamabad–Rawalpindi corridor. Multiple regression, and PROCESS macro mediation and moderation analyses were performed (Hayes, 2022). The findings revealed that digitalization (β = .320, p < .001) and automation (β = .609, p < .001) are both significantly and strongly predictive of the restructuring of the job market. Automation and digitalization, together, explained the skills development variance (R² = .586) with the strong predictive power of automation. Workforce flexibility was found to partially mediate the relation between digitalization of the workforce and skills development (indirect B = .064, Boot 95% CI [.027, .103]). The automation of corporate training initiatives was found to significantly and negatively impact skills development (B = −.017, p = .029). This suggests that highly trained corporations lessen the dependence on automation to improve skills but use corporate training instead.These results expand Human Capital Theory and Technological Disruption Theory in the context of Pakistan’s dual Islamic and conventional banking systems. They also have clear impacts on State Bank of Pakistan regulatory policy and on banking human resource strategy and workforce equity.

Keywords:  Digitalization, Automation, Fintech, Workforce adaptability, Corporate Training Programs.