How to Survive Banking’s Biggest Threat: Staffing

There's a growing realization among banks and credit unions that the new competitive environment requires incumbents to transform their recruiting and retention strategies to challenge fintechs for the staffs of the future.
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To compete with upstart fintechs and “megafintechs,” like PayPal, traditional institutions need to morph, as one analyst says, “to become tech companies that provide banking services.” Key to their success will be to identify new critical skills, expand potential recruitment areas, and change the workforce culture. Otherwise, fintechs with their revolutionary approach to staffing will leave traditional financial institutions in the dust.

“Since digital finance is rapidly growing, new roles are being created whereas others are becoming obsolete,” says the Centre for Finance, Technology and Entrepreneurship in a massive report. “This requires a renewed awareness of opportunities borne out of fintech growth for job seekers [and] hiring organizations.”

Attention Grabber:

Two thirds of financial institutions now consider talent a top concern, up about 45 percentage points in one year.

The ability to attract qualified talent has become a top concern for both bank and credit union executives. A survey by Cornerstone Advisors finds that 67% of banks and 63% of credit unions said this in early 2022, up from 19% for both groups the year before. The driving force behind this is the accelerated pace toward digital transformation of the industry, which requires remote access, instant decisions, personalized attention, and multi-device convenience.

What are the jobs going begging? Late last year CFTE canvassed the worldwide financial technology employment field and found 40,000 job openings at the largest fintech companies. Of these, 50% to 65% were purely technical, while 10% to 30% were nontechnical or financial industry specific. “On average, 80% of the jobs in fintech companies would be similar to jobs of tech companies, which is the reason why we came up with the conclusion `tech is eating finance,’” the report concludes. (The phrase is part of the title of the report.)

Three Ways to Approach the Talent Challenge

Banks have three main opportunities to better compete for talent with fintechs, according to a report by eightfold.ai on how banks can close the skills gap with fintechs.

1. Upskilling/reskilling. This not only applies to recruiting new talent but retaining existing staff. It requires rethinking the requirements of traditional job slots that are likely to change with new technology.

The CFTE report outlines skills needed for current, traditional positions but which are changing to meet future needs. For example, it lists several requirements for the ideal fintech candidate for data science positions:

  • Data analysis and visualization
  • The ability to work in a fast-paced environment
  • Cross-functional collaboration
  • AI and machine learning
  • Professional or project experience.

(Not a mention about financial services knowledge.)

2. Calibrating roles with future skills. This opportunity requires analyzing how current positions are evolving with technological developments that may completely overhaul how those jobs are done. The job roles in fintech companies are quite different from financial services and much more similar to technology companies, the report says. Skills to get into fintech are more `tech’ than `fin.’

Key Difference:

Compared to a typical financial institution where the IT department would comprise 15% of the total workforce, in a fintech it would be about
55%.

To illustrate the growing impact of technology, eightfold.ai reports that skillsets for product managers include user research, rapid prototyping, and data analysis.

3. Hiring for potential. This opportunity means looking for people who are most able to use what skills they already have to learn related skills. The eightfold.ai report refers to this situation as recruiting for “adjacent skills.”

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Empowerment is Key

Financial institutions must provide employee experiences that are digital, flexible, collaborative, and rewarding, advises Monica Hovsepian, Global Industry Strategist for Financial Services at OpenText. Institutions should invest in digital technologies — such as mobile, content services, and analytics — “that not only empower employees to better serve customers but also provide an environment where they wish to work.”

“Empower” is the operative word, as it covers several avenues of approach. A study by software company Lever that looked at employee retention — and by extension recruitment — sheds some light on this. While the study covers multiple industries, it may inform financial institution recruiters.

It found that the biggest motivator for employees planning to stay in their current position is, not surprisingly, salary and/or potential bonuses. Of the employees staying at their company, however, 41% said they will ask for some sort of role change in the coming year. This reflects the trend that younger employees, new to the workforce and currently in gig-based jobs, are starting to seek permanent careers that establish themselves and positions them for upward mobility.

Internal Mobility Is a Must:

Pay is critical, but the opportunity to change positions is important enough that three in five would leave without it.

“Employees are so invested in creating a new role that nearly a third (31%) would take a pay cut to change positions, and three in five (61%) would start searching for new jobs if their company didn’t allow them to switch roles,” the study found.

This echoes the importance of upskilling/reskilling mentioned earlier. The Lever study found that 61% of the employees surveyed have taken courses to grow in their current role, while 23% have taken courses to grow into a new role. A company’s offering of opportunities for upskilling or reskilling motivates one in ten employees, and nearly one in five Gen Z employees, to stay at their company, the study found. More on Gen Z in a bit.

The Lever researchers concluded: “As recruiters and talent acquisition teams enter another year of the Great Resignation, its imperative that organizations focus not only on culture and perks, but nurturing environments where internal mobility, flexibility, compensation, and upskilling are inherent to their cultures.”

Gen Z’s Preferences… and ‘Boomerangs’

Generational trends need to be considered as well, particularly that of Gen Z, which is exhibiting unique features. For example, when the Lever study asked “Would employees rather be at a company that pays more or gives them a sense of purpose?” the Gen Z segment picked sense of purpose over more pay, 42% to 38%. (The corresponding figures for Millennials were 40% and 49%.)

Of course there’s more to it. “To win talent, employers must think beyond the traditional package and offer creative benefits like tuition reimbursement, free lunch, flexible working hours, hybrid work environments, on-demand pay, etc.” says Jeanniey Walden, CMO of DailyPay, in a GOBankingRates blog. “Even adding one or two of these benefits can significantly increase Gen Z employee retention and happiness.”

“Boomerangs” in an HR context refers to former employees who have left the company but now would be amenable to returning to their former employers. It’s a growing trend in recruitment circles. “A simple call from a former manager or colleague urging them to consider coming back may be enough to stimulate a boomerang rehire,” says John Sullivan, a recruiter analyst.

The Lever research found that 52% of employees would consider returning to a former employer, with most returning for better benefits (29%), more room for growth opportunities (22%), and more opportunities for upskilling/reskilling (16%).

Sullivan says the best way to lay the groundwork for fruitful boomerang recruiting is to maintain contact with departing employees through a corporate alumni program. As the employee first leaves the company, ask if they would be willing to be included in a “boomerang prospect pipeline,” through which all parties may stay in touch.

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