Banking Must Bridge the Growing Digital Transformation Skills Gap

Financial services organizations must transform to meet the digital needs of consumers. This requires new technologies and automation, changing the skills and talent needed to meet the future. Unfortunately, this talent is in short supply, necessitating new human resource strategies.

Financial institutions globally are investing more than ever in technology and digital capabilities that will allow them to compete more effectively against both fintech and big tech organizations. While advances in revenue growth, cost cutting and customer experience have been achieved, much of the payback from these investments have been stalled due to the lack of talent in the marketplace.

According to PwC’s 22nd Annual Global CEO Survey, almost 80% of the banking CEOs who responded saw skills and talent shortages as a threat to their growth prospects, with 35% being ‘extremely concerned’ and 44% being ‘somewhat concerned’. “Most [financial institutions] believe that this skills gap is undermining their organizations’ ability to innovate effectively and provide a winning customer experience,” stated the report.

So why is upgrading talent so important today? For financial institutions, it has become imperative to keep pace with the expectations of retail and business customers. Increasingly, these customers expect the same simplicity, speed and intuitiveness that they receive from the big tech and fintech companies.

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Human + Machine

Meeting these expectations requires the collaboration of humans and modern technology. As more back-office operations become automated, the importance of human capabilities such as creativity, empathy and leadership become more important. Even digital consumers desire a combination of human + digital in certain instances that may involve customer care and advice.

To this end, nearly three-quarters of respondents to the PwC survey said that deploying emerging technologies will have the potential to separate high-performing firms from average (or worse) performers in the near term. At the same time, more than 90% believed that artificial intelligence (AI) will significantly change how they do business over the next five years. These capabilities require human interaction. This has resulted in 79% of executives being either ‘extremely concerned’ or ‘somewhat concerned’ about having the needed skills in the future.

The PwC CEO Survey found that updated skills availability can impact all areas of today’s digitally transformed organization. For instance, nearly two-thirds of respondents who stated they were ‘extremely concerned’ about skills shortages believed that their organization would be ‘unable to innovate effectively’ or that quality standards and/or customer experience would be impacted.

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Shift in Skills Desired

There has been a shift over the past few years in the type of skills that leaders say they are looking for. In 2008, banking CEOs surveyed by PwC were struggling to find people with global experience. Today, organizations are looking for tech savvy leaders and employees. According to the PwC research, “At every level of the hierarchy, people are needed who can harness innovative thinking, form the right strategies and apply the systems and tools that best fit the needs of the business.”

Organizations are looking for employees that can work well with new technologies but also display leadership, creativity, empathy and curiosity. In other words, although purely functional skills related to automation and AI are often essential for business growth, they are not enough.

Some of ways humans will be used in the future of work include:

  • Increasing current human capabilities. Employees can leverage automation and advanced analytics to provide advice to a far wider array of customers that previously would not receive such advanced solutions.
  • Increase trust and confidence. While technology can handle routine transactions, humans can perform more advanced functions, assuring customers that new technology has not eliminated the ‘human touch’.
  • Increase transparency. Humans are the best to discuss how AI and other technologies are being deployed within an organization to inquiring customers.
  • Internal training of skills and talents. Employees across the organization are beginning to be concerned about their roles in the future. Up-skilling and personal development will be key to providing the talent needed.

Strategies for Closing the Skills Gap

An overwhelming majority of banking executives are concerned about the skills gap in the industry as well as the ability to hire new workers with the skills required to transform their organization. That said, few banking CEO view hiring from the outside as the best future course of action.

The reluctance to bring in outside talent is compounded by regulator’s bias against having too many employees without banking pedigrees taking on senior technology roles. In addition, the ability to get talent from the outside has been hurt by the negative view of the banking industry. “As financial services organizations compete for talent with industries that are seen as more cutting-edge, a huge amount of work is needed to strengthen the underlying employer value proposition,” says Russ Riggen, partner, financial services at PwC.

Alternative options to hiring from the outside includes leveraging current solutions providers, strategic partners and project workers that are not part of the full-time staff. According to the PwC banking research, 40% of organizations will focus on retraining and up-skilling, 23% will hire from competitors, while hiring from outside the industry and building a direct pipeline from higher education organizations will both be done by 16% of organizations. Finally, 5% will be looking at contingent workers to fill the gap.

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Benefits of Up-Skilling

The benefits of up-skilling include a somewhat lower cost of job placement, the ability to control the talent pipeline and the benefit of using this internal development process as a workplace benefit for both internal and external candidates.

One of the most celebrated examples of corporate up-skilling was the announcement by Amazon that it’s investing $700 million to train 100,000 of its employees, so they are more prepared for the digital transformation of Amazon. This initiative will involve employees at all functional areas of the company and at all experience levels.

What is interesting, and part of an ongoing trend seen notably in China, is that this training is being done at the Amazon Technical Academy and Machine Learning University as opposed to an outside educational organization.

Amazon believes the benefits extend beyond upgrading current employee skill sets. First of all, the internal morale of the organization gets positively impacted when employees realize there is an opportunity for growth and that they can avoid losing their jobs as automation and digital capabilities increase. This training initiative is also a powerful recruitment and retention tool. Finally, the focus on retraining is part of a broader initiative that includes a higher minimum wage ($15 per hour), 401K and parental leave.

The Time to Start is Now

While finding skilled workers and retraining current employees is imperative, automation will still result in some job losses since not all employees may be able to adjust. Therefore internal communication and transparency will be required to transition forward.

The reality is that we are in a tight labor market where the skills gap in banking will only widen if current employees are not trained to work with new technologies. Beyond training the staff level employees, there is also a need to train executives who must lead this transformation. As we have seen, the technical skills of many banking leaders is sorely lacking.

The key is to begin the educational process immediately. By starting today, banks and credit unions will not only be in a better position for the future, they will build a stronger organization of employees and leaders prepared for a digital ecosystem today.

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