Tackling the talent challenge in consumer banks

Legacy enterprise technology is making it difficult for retail banks to offer the digital experiences that customers are increasingly looking for. While banks are investing in technology, a new challenge is growing: attracting and retaining people able to design and manage top-notch digital experiences.

One key reason is that retail bank leaders are competing to attract the same highly skilled, digitally savvy people that are also in high demand at other companies in financial services, as well as in consulting, aerospace and other industries.

High salaries are not the answer

The shortage of experts in financial services technology cannot be solved solely by dipping into the talent market. Even while consumer banks are offering high compensation packages, there just aren’t enough potential candidates available.

Our research has found that the banks that stand the best chance of navigating this challenge successfully are the ones that don’t view themselves as banks any more, but rather as software or technology companies that happen to offer financial services. We call these players “pacesetters.”.

These are the banks that see this current state of digital transformation as more of a talent issue than a technology problem, and have been willing to engage with systemic people solutions to tackle it. Pacesetter banks are shifting their recruitment approach from hiring based on specific competencies to prioritizing the next-gen skills needed to shift the talent mix toward next-gen capabilities.

Pacesetter banks focus on advanced technical skills such as extreme programming, microservices or Kubernetes, as well as on skills related to product management and the seamless design and delivery of digital products and services. In some cases, consumer banks focus their recruitment on highly skilled technologists, regardless of their current industry.

An alternative approach at some banks is acquiring companies with the desired talent. This may work as an interim solution, but a much more sustainable practice is to look at reskilling and upskilling the current employee talent pool, which is underway at many consumer banks.

Banks must also focus on creating organizations that prioritize employee experience, where people feel they will be supported to grow and develop over the long term. To achieve this, culture must be a force stronger than rigid organizational rules.

Pacesetters outperform the rest

Successful pacesetter banks emphasize retention, reskilling and redesign toward building employee-focused organizations. They outperform their more traditional bank competitors with people practices that demonstrate a better return on equity and lower employee churn.

Are you a pacesetter bank? One way to find this out is to evaluate how much your bank is a proponent of digital-first experiences. If you have a large branch network with many physical points of service, you have probably not fully embraced a digital-first approach. Pacesetters are characterized by branch automation and branches that are staffed by banking professionals who manage a range of financial needs through the use of digital terminals.

Back-end technology at pacesetter banks is also usually more operationally efficient and automated, with fewer people in middle and back-office roles. They also tend to have more dedicated IT people to manage this innovative infrastructure.

Pacesetters also invest in people specifically to oversee transformation. They employ more people as senior software engineers and also in transformation roles that continuously look for opportunities to modernize. In short, they place more people where they need them to create better digital products and services for their clients.

Our research spotlights a number of consumer banks that are rethinking and modernizing at a fast rate. ING, a Dutch bank, has redesigned work to embrace the new digital era in consumer banking with a focus on technology-enabled banking solutions. DBS, a digital bank from Singapore, prioritizes automation to offer both customers and employees high-end digital experiences. Rabobank, meanwhile, has adopted a more flexible approach, allowing employees to design a hybrid work-life balance that works best for them.

No single pacesetter bank has everything worked out. But pacesetter banks have one thing in common: They acknowledge that all of their people practices are interconnected and they are willing to experiment with how they operate them within that idea.

The consumer banking sector must move at pace through digital transformation, and people are key to achieving success. Pacesetters approach reskilling differently than traditional banks by boldly redesigning the work environment and prioritizing fresh and effective approaches to recruitment and retention.

Stella Ioannidou is director of research at The Josh Bersin Company.