Industry revolution, blurred lines and the race for the best

Industry revolution, blurred lines and the race for the best

 

I don’t think I’m exaggerating when I say that the banking industry is undergoing a revolution. The sector is arguably the biggest target for disruption with fintech entrepreneurs committed to destabilising the established old guard and reinventing an industry that has had its reputation ravaged post financial crisis.

Fintech offers a range of financial services from loans to overseas money transfer to online payments, the list goes on… and tired  of dealing with the clunky, out dated and often excruciatingly frustrating process of the established providers, in the mobile ‘on demand’ economy, consumers are lapping it up.

Venture Capitalists have invested $23.5 billion globally in the fintech sector in the past two years and Goldman Sachs estimates that start-ups could eat into the annual revenue streams of established financial services organisations by up to $4.7 trillion and $470 billion in profits.

As this new group of ambitious, agile fintech organisations go on the offensive the big players are determined to fight back and we’re seeing a clear blurring of lines between what used to be two distinct industries – financial services and technology. Barclays’ Head of Design and Innovation summed things up nicely, as quoted in yesterday’s Financial Times:  “technology is changing and disrupting our whole industry… we’re becoming more like a technology company”.

So, there’s no doubt, we’re in the midst of some very interesting times and it’s going to be fascinating to see how the picture unfolds. The established banks and other traditional financial services providers are not going to go away but if the fintech revolution continues at pace they are at risk of experiencing  significantly diminished profits. Quite how much an impact fintech will have remains to be seen but it is certain that they are going to make serious inroads and technology will continue to be at the very heart of the development of the industry. And herein lays the problem….

For the established players to fight back against the revolution, and revolutionise themselves, they’re going to need the best talent to come to them. Going back just a couple of years, If an established financial services business approached the best and brightest tech talent outside of their own sector, there was a good chance the person on the receiving end of the call would have thought it was a joke. “Why on earth would I want to work for a bank? Have you read the papers recently?”

Whilst for those business leaders looking to take advantage of business opportunities offered up by advances in technology, this was a difficult message to receive, at least it meant that the best talent weren’t going to their competitors.  They were in other industries and out of harm’s way. There was a comfort in knowing that whilst you couldn’t get who you wanted, neither could your competitors.

But that was then and this is now. What used to be seen by the best and brightest in the tech world as a clunky, out dated, highly regulated and quite frankly ‘dry’ industry, financial services is now riding the crest of an entrepreneurial wave and it is seen to offer up a very real opportunity to be part of something really quite profound in terms of where the industry could go – David may not completely overcome Goliath, but he probably has a good chance of inflicting some damage, and for many this is an exciting and attractive proposition.

And it’s not only the very real threat of losing talent to others in the same industry that is causing business leaders within the established FS world lose sleep.  Whereas previously it was okay if they couldn’t get the best, as their competitors were in the same boat, there is a real danger that the other industries they were fishing in are now becoming competitors with the likes of Amazon, Facebook and Google all expected to make forays into financial services in the not too distant future.

In order to compete in this new tech world order, the established players are going to need to get creative and fight for the best talent – the race is most definitely now on. The old methods of talent acquisition aren’t going to work. In order to stand any chance the larger and established FS organisations are going to need to:

Get real… hunting in the usual tech suspects of where ‘the best’ are is likely to be fruitless. In my experience, over inflated egos and misconceptions of how they’re perceived in the market leaves businesses waiting for the ‘ideal’ candidate, a candidate that is never going to arrive, which simply further delays innovation.  Hiring managers need to be prepared to open their minds to left of field talent and take some risks on ambitious candidates that may not be the round peg for the round hole but who have real potential.

The same goes for businesses looking for top tech talent straight out of leading universities. Apart from the fact we’re in an age where we should be looking past who got what degree from which university, someone without a degree but who’s spent the last few years writing code, for example, may well be more useful than a high-flying grad whose spent the last three years in a lecture hall.

Play to the market… use deep insight of the external market to understand the tech talent landscape – what do they think of the organisations brand, what do they want, and what will attract them.  And then give them it. If a business has their main operation somewhere in the outer suburbs, in an office that was built in the 1970s, with a workforce that was there at the opening ceremony, then what are the chances of attracting the next generation of transformative talent?

Develop…their brand. The way the external market view many of the traditional and established FS players is, in lots of cases, unlikely to be the view they necessarily want. There is lots of work to be done to overcome the reputational devestation caused by the financial crisis and present the business in a new and ultimately different light. There needs to be an employer brand that calls out to the tech talent market – the types of problems they’ll be solving and the opportunity to make a real difference through their intellect are just two elements likely to make a difference

Create… a culture within the wider corporate culture. Part of what makes the likes of Amazon and Google so appealing to the best talent is the working culture that they provide – casual dress and flexible working at the most basic level. In ‘most’ cases (and there are exceptions) the closest the big and established FS firms come to this is allowing no ties to be worn, alongside what’s become the obligatory ‘dress down Friday’. With the exception of one of the progressive challenger retail banks, I can’t remember the last time I was greeted by anyone in a FS firm who wasn’t wearing a suit (on a day that wasn’t Friday of course). This simply doesn’t and wont float in attracting the best tech talent out there and, in fairness, most FS businesses I talk to understand this.

Deutche Bank are one of these. They are in the process of building an innovation network with bases in London, San Francisco and Berlin and their Head of Innovation draws analogies to the start-up business environment which is so attractive to those in the fintech sector –   “it’s like a start-up within a large organisation” – it’s exactly these types of messages that will attract the types of individual required and how organisations that make up the established FS order need to be thinking.

Plan…for the future. I’m loathe to use the term ‘strategic workforce planning’ as all that occurs is procrastination, “We haven’t decided which part of our business own it… so are still thinking about it” , “ we don’t really know what it is…so aren’t doing anything”. It doesn’t need to be about science. It just needs to be an understanding of digital/tech strategy and the broad pools of skills that are likely to be needed over the next 12-24 months.  Once this is known, organisations can start to develop these talent pools by engaging with the market before roles become live and by the time they do, the wider pool will have been developed to a ‘talent puddle’ of the very best of those they’ve engaged who, will hopefully be engaged enough to want to work for them.

We’re likely to continue to see some of the bigger players overcome some of the talent challenges they face simply by using their financial clout. Santander launched a $100m investment fund in 2014 to invest in seed stage fintech businesses which they could partner in taking to a mature stage. Similarly, Barclays is using its own version of Dragon’s Den to encourage some of the world’s most exciting fintech start-ups to go head to head in a pitching process in a bid to win investment from Barclays into technology that the bank could eventually use.

Whilst the approach the likes of Santander and Barclays are taking is innovation in itself and is something we’re likely to see more and more of, it does raise deeper, more philosophical questions regarding the role of fintech organisations who perhaps start life with ‘challenger’ ambitions, but that’s a whole other debate…

2016 is shaping up to be an exciting year for all in the FS space, full of challenges and uncertainty and the ensuing opportunity that comes with them and I for one and am looking forward to working with my clients tackle some of these challenges head on.

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