Vertical vs Horizontal: Mapping AI-Driven Displacement in the BFSI Sector

In recent months, leaders of India’s largest banks—HDFC Bank and State Bank of India—have made a striking declaration: AI adoption will not lead to layoffs in their banks. Instead, they envision AI as a force multiplier, enhancing staff capacity and enabling internal upskilling. Axis Bank, Bank of Baroda, and Kotak Mahindra Bank have echoed similar sentiments, framing AI as a tool for productivity and transformation—not redundancy.

This stands in sharp contrast to projections from Western banking giants. Bloomberg estimates that up to 200,000 jobs may be cut globally in the next few years due to AI! This may be an exaggeration, since Bloomberg is more a doom-speculating platform and less a news-reporting platform. But the trend is clear. CIOs and CTOs in the West anticipate 5–10% workforce reductions, especially in roles vulnerable to automation.

So what explains this divergence?


A New Lens: Horizontal vs Vertical Displacement

AI doesn’t just “replace jobs”—it displaces roles. The critical (and sociological) question is: in which direction?

- Horizontal displacement means the employee is ejected from the system. Their role is automated, and they’re laid off.

- Vertical displacement means the employee is repositioned within the system. Their role evolves, and they’re upskilled to supervise, design, or collaborate with AI.

This directional framing transforms the AI discourse from a binary (“jobs lost or saved”) into an axis of adaptability.


India’s Engineering-to-BFSI Pipeline: A Strategic Asset

For years, India’s middle-class culture has been criticized for funneling engineering and science graduates into the BFSI sector. “Why study engineering if you wanted to work in a bank?” was the refrain.

But in the age of AI, this very culture, I argue, may prove to be decisive. Because:-

- Engineering-trained BFSI professionals possess mathematical literacy, systems thinking, and technical receptivity.

- These traits make them upskillable—ready to transition from junior roles to supervisory positions overseeing AI workflows.

Therefore, what was once seen as a misallocation of talent may now be a strategic buffer against horizontal displacement.


Doubling Down on Who You Are: AI and the Identity Split in White-Collar Work

On the other hand, AI is also redrawing the boundaries of creative work. For non-mathematical professionals in white-collar roles, the challenge is no longer about technical fluency—but about creative originality and strategic imagination.

In this new landscape:-

- Technical professionals can no longer pretend to be creative. AI can generate surface-level content—images, videos, templates—faster than any human. So creativity must now be deep, strategic, and outcome-driven.

- Creative professionals can no longer pretend to be technical. AI workflows require precision, logic, and systems thinking. Dabbling won’t suffice.

This collapse of role overlaps means that white-collar professionals must now double down on who they are:-

- If you’re technical, lean into systems, data, and AI orchestration.

- If you’re creative, lean into brand building, narrative design, and campaign strategy—using AI not just to generate assets, but to deliver meaning.

The test for non-mathematical grads is not doom—it’s differentiation. Can you use AI to design a brand resurrection campaign? Can you orchestrate a customer relation journey that AI alone couldn’t imagine? Can you turn generative tools into strategic instruments?

In this era, identity clarity becomes a competitive advantage. The age of “sort-of technical” or “kind-of creative” is over. AI forces us to choose—and then to amplify.


Diverging Models: India vs the West

India’s BFSI sector may be uniquely resilient to AI-driven layoffs because of its workforce composition:-

- Banks employ large numbers of engineering and science graduates in junior roles.

- These professionals are mathematically literate and technically receptive—making them ideal candidates for vertical displacement.

- Indian banks are investing in internal AI labs and skilling programs to redeploy staff.

In contrast, Western banks face structural constraints: -

- Their workforce tends to be highly specialized, with limited cross-functional mobility.

- Labor rigidity and legacy systems make up-skilling difficult.

- AI adoption is often outsourced—leading to replacement, not augmentation.

The result? India leans toward redeployment, while the West braces for reduction.


A Call-to-Action for A BFSI Skilling Policy

If India wants to turn its latent advantage into a durable lead, it must act now. Here’s what policy-makers, bank leaders, and skilling institutions should prioritize:-

- Map the AI-readiness of BFSI staff: Create diagnostic tools to assess mathematical literacy, tech receptivity, and upskilling potential across roles.

- Design modular skilling pathways: Build short, stackable programs that help junior staff transition into AI-supervisory roles—without requiring full re-education.

- Leverage engineering-trained staff as anchors: Use them to seed internal AI labs, mentor peers, and pilot new workflows.

- Incentivize vertical displacement: Offer career progression tied to AI fluency, not just tenure or legacy KPIs.

- Build public-private skilling alliances: Partner with IITs, NITs, and fintech startups to co-create BFSI-specific AI training modules.

- Track displacement direction: Introduce metrics that distinguish between horizontal and vertical displacement—so institutions can be monitored (and held accountable, if required) for their AI transition strategies and outcomes. 

This is not just a workforce issue. It’s a strategic inflection point for India’s financial system.


Final Thought: The Defining Question 

AI won’t just reshape jobs. It will reshape institutions, cultures, and career narratives. The question is not whether displacement will happen — but whether it will be horizontal or vertical, technical or creative, outsourced or owned.

And that may be the defining sociological question of our time.

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