The financial services industry has always suffered from legacy technologies and skill gaps, and these problems have presented themselves as an inescapable loop for most. According to a 2020 World Economic Forum report, 74% of companies are unable to find the right skills in the local labor market, while 43% report skill gaps in their present leadership teams. While top players in the industry like JPMorgan Chase identified and invested in the need for reskilling in 2015, and once again in 2019, a majority of companies are still in the acceptance stage.
Evolving customer habits, cost-related pressures and shifting regulatory policies were the major drivers of this rapid shift in the industry. In 2020, the COVID pandemic has been added to the list. Customer habits are changing, employees are being recognized as stakeholders, and GRC impacts due to the pandemic have added pressure to adapt to new rules of doing business within weeks. In the process, a significant chunk of existing roles are being rendered obsolete. New skillsets and rapid digital transformation initiatives are enabling leaders to replace legacy ways of doing work with better agility, efficiency and greater resilience at lower costs. So, how can companies get to this point with strained bottom lines?
Skill gaps in the current workforce and its impact
In financial services, the need for digital transformation initiatives are being vocalized almost unanimously. However, only a few companies have led successful transformation efforts that truly offer value to their organization and enhance customer experience. One of the biggest challenge in transformation initiatives is skill gaps in the current workforce that cannot be closed by simply enrolling new hires. Moreover, transformation initiatives are cost-intensive, and so is hiring new talent. While the new rules of the game are more cost-effective, finding the right skills that can play by these rules is a major hurdle.
The perception of this impact is also varied – while half the companies expect a reduced workforce due to automation, over a quarter believe the opposite. For the organization, skill gaps manifest along three components:
- RoI on technology: According to a McKinsey research, employees are a significant determinant of the effectiveness of digital transformation, and this isn’t as surprising. The effect, however, is heightened when skill gaps influence the entirety of a company’s workforce. Consider an excellent client servicing team equipped with the best remote collaboration platform that is tech-challenged.
- Employees as stakeholder: As the pandemic calls for greater customer-centricity and sensitivity in general, retraining the workforce to take an empathetic approach to solving business problems is crucial. Why? Imagine a manager dealing with a sick employee, or a customer unable to find help through your automated service bot. Business is becoming more people-centric, and employees are emerging as a relevant stakeholder in the process.
- Agility: Skill gaps can also subtract the promise of agility from investments in disruptive technologies. This is because while specific use cases may reduce the need for human touch through a business process, implementing and maintaining them with a lean workforce needs employees with full-stack expertise distributed across agile teams.
New skills for tomorrow’s workforce
While the need for digital transformation is being rightly acknowledged, this transformation must happen in sync with organization-wide upskilling and reskilling initiatives. According to an HCL research conducted in collaboration with the University of St. Gallen, the following six factors are shaping the skill profile of future-ready workforce in financial services providers:
- Customer experience: Customer expectations are on the rise, and this is pressuring FS companies to redesign their customer journeys. Omnichannel and 24x7 presence has become the norm rather than a differentiator, which calls for novel value propositions. In the digital era, the cost of switching is low, which places greater power in customers’ hands. Customer-centricity is therefore becoming the key to finding business. As a result, UX designers are highly in demand and hold significant value in today’s digital economy.
- Digital, digital, digital: In a world where physical interactions are being replaced by digital interactions, collaborative skills for back-office processes, proficiency with software suites, and skills to interact and provide delightful customer experience through digital interactions with an empathetic approach are becoming indispensable.
- Incubation and innovation: Rapid advancements in technology are refining various processes in the financial services industry. Consider new ways of judging creditworthiness, for example, through IoT health data or blockchain-based autonomous credit systems. Bringing these innovations to the market requires teams with diverse talent to work along rapid build-test-learn pathways.
- A new agile culture: In order to bring innovations to the market, leaders are building agile teams with hires outside the industry to partner with startups on innovative products. This calls for a shift from the process-oriented approach to a project-based one, where more end-to-end responsibilities are realized by stakeholders. This can be achieved with employees possessing a wider skillset rather than a more concentrated one.
- Simplification of application landscape: Web and mobile apps are quintessential for increasing the speed-to-market. These digital markets are therefore fueling the demand for software developers, UX specialists, marketing specialists, risk analysts, etc.
- Automation and efficiency programs: Increasing pressure on the bottom line, especially during a restrained economy is forcing companies to adopt automation for various workflows, which have the potential to consume over 40-60% of the existing jobs in financial services.
Roadmaps for a synchronized transformation
The urgency of closing these skill gaps and retraining the existing workforce is obvious. However, FS companies must recognize that technology doesn’t share an opposite relation to a workforce equipped with stale skills. In fact, tech companies have already demonstrated the fact that technology can be an enabler of this reskilling revolution. Leaders in the financial service industry are partnering with educational institutions and technology leaders for identifying the right upskilling, reskilling and micro-skilling roadmaps to efficiently close these skill-gaps.
A leading financial services provider in the UK invested £3bn over three years in a digital transformation initiative. As a part of this initiative, the company identified the top 10 skills that were missing in the workforce and made a public commitment to deliver 4.4 million hours of learning to its employees. The company also launched an online learning hub that empowers employees to take charge of their careers.
Once such data is available at a granular level, companies can integrate this information with employees’ skill profiles to advise and incentivize the right learning trajectories and translate this problem into a win-win situation. Consider augmenting the ‘careers’ page with skill portals, that enable employees to acquire the right skills digitally. This problem should be recognized as one of social responsibility, which can be tackled by joining hands with competitors and investing in avenues that impart in-demand skills to the right people in the existing workforce – both in the short- and long-term.
For banks and financial institutions across the DACH region, the issue is compounded by demographic challenges and the need to attract the next generation of workforce on the same footing as tech companies in Silicon Valley, London and other global metros. One method has been augmenting the skillsets of the current workforce with bootcamps and extended collaboration with top universities for closing the most immediate gaps. Within organizations, creating team settings that are conducive to cross-pollination of skills is another effective measure for introducing new skills in the existing workforce. Legacy organizations need to realize that not only is technology changing the number and kinds of people working in banks and financial institutions, but the nature of their careers is also changing. While hiring new expertise will be unavoidable during demand spikes and urgent situations, the true value of digital transformation will emerge only when the workforce can run the new machine smoothly. Until then, the Finance 4.0 paradigm will continue to manifest as an aspirational ceiling function that majority of companies fail to realize.