Paul Reynolds is Managing Partner of the Financial Services Practice at boutique executive recruiter, Wilton & Bain. (http://www.wilton-bain.com)
These are uncomfortable times for traditional banking and financial services businesses. Their reputations have not fully recovered from the financial crisis, and there is also an increasingly onerous regulatory burden coupled with vigorous competition in the shape of innovative and agile fintech start-ups. These newcomers are not only gaining traction in the marketplace, but are also attracting top talent.
The problem the traditional players have got is their culture and working environment. The City of London and Wall Street is – not entirely unjustifiably – perceived by many as being ‘pale, male and stale’. Firms are hierarchical, risk-averse, lacking creativity, beset by procedure and regulations and with a plodding, step-by-step approach to career development
A traditional source of talent was from business education but the finance industry saw a 20% percent decline in MBA graduates joining its ranks between 2007 and 2013 while the percentage of graduates going into technology careers more than doubled over the same period. The reason is simple. As banking commentator, Chris Skinner, put it, “how do you attract the guys and gals who like jeans and pizzas to join an institution full of suits?….Imagine Silicon Valley meets Wall Street or Anonymous meets 10 Downing Street. It kind of does not mix. And yet, if banks cannot mix these things and attract this hipster talent base, then they will fail.”
The problem banks have is that they can only start to improve their customers’ experiencer if they first improve their own employees’ experience. That’s even before they work out how to adapt their businesses to adapt to changing business and operating models of the future. But their inability to meet customer expectations and deliver the kind of responsive, focussed service that we have come to expect from retailers and ecommerce firms is what is opening the way for new-entrant digital disruptors.
Yet it clearly isn’t the finance sector per se that’s the issue – the fintech pioneers who have popped up over the past few years have no trouble attracting talent. And you can guarantee that if Apple or Google launched headlong into financial services, they’d have no trouble whatsoever attracting the crème-de-la-crème of digital talent who wouldn’t otherwise go within a mile of a traditional banking IT role.
Of course, one thing that incumbents do have in abundance is capital. So it is interesting to see some banks such as JPMorgan and Scotiabank creating so-called ‘digital factories’– start-up-style tech hubs – to incubate their digital operations in an environment that is more conducive to attracting millennial talent.
Banks are also starting to invest directly into FinTech startups and others are setting up FinTech incubators or backing initiatives such as Accenture’s FinTech lab in a bid to find answers to some of the big digital age challenges the financial industry faces.
Meanwhile in Australia, the CEO of the 180-year old ANZ bank, Shayne Elliott, has taken to asking fintech start-ups and entrepreneurs to make contact with him directly to help him come up with ideas for the bank’s digital transformation.
And Elliott seems to have a strong grasp of the task his industry faces. “We need to learn to think like a small disruptive company that is prepared to cannibalise our revenue streams,” he said, “because it is in digital opportunities that we are going to find growth.” That’s something every CEO of a financial firm should have not just pinned on their wall but connected within their culture.
So is anything the big banks and established players can do about this?The entrenched problems faced by financial institutions were spelled out last year in an illuminating study of 65 firms by UK consultancy The Disruption House. This found that banks have a relatively low innovation capability and that their leadership is particularly weak on the key issues surrounding adapt-ability and software-centric decisions. Moreover, their innovation capabilities are targeted at products rather than process. “Banks are fixated with the idea of digitisation without understanding the new role of business platforms,” the report states.
“We found that leaders within banks have been extremely slow to develop a vision of what the banking industry might look like in ten or twenty years hence….the lack of true thought leadership on the future of banking is striking.”
The report went on to argue that banks need to harness younger talent if they are going to develop new operating models – “an inter-generational dialogue at the leadership level”. The changes banks need to make require continuity over a 10 year period; younger executives are closer to the coal face and perhaps quicker to grasp what changes need to be made, and will inherit the challenges of change, so require experience through participation in new process model decisions.
But change they must, because only after completing their own transformations will the traditional banking and finance sector players be able to re-position their employer brands to attract the type of young and up-and-coming talent that are now joining fintech businesses in their droves.
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