Closing the current and future technology talent gap in financial services

Financial institutions, like most US companies, are facing an imminent shortage of talented IT professionals as the demand for technology talent — driven by the rapid adoption of digital platforms, cloud computing and cybersecurity needs — fast outpaces the current and future pipeline.

This demand will only intensify as more companies adopt full digital operations — from artificial intelligence (AI) and machine learning (ML) to the full integration of blockchain. To compete for talent, financial institutions will need to take steps now to attract and retain people with the necessary skills for this digital future.

The trends are concerning. The global shortage of full-time developers will increase from 1.4 million in 2021 to 4 million in 2025¹. Even though the US economy added 467,000 jobs in Q1 2022, the IT sector only added 4,000 jobs and in April 2022, employers posted nearly 450,000 unfilled IT job openings, according to the CompTIA Tech Jobs Report.²

Other technology skill sets that report significant shortfalls include:

• Cybersecurity (shortage of 400,000 in US and 4,000,000 globally)³
• AI/ML
• Cloud development
• Data science/analytics (shortage of 250,000)⁴

The large number of unfilled positions has been compounded by the reality that the pandemic and changing immigration policies significantly lowered the number of new technology professionals available to fill higher-skilled technology jobs. This trend continued in 2021, when US colleges reported a 43% decline in enrollments for international students.

Recently, organizations have turned to increasing total compensation packages to attract and retain technology talent. While compensation plays a key role in an organization’s talent strategy, any new investment may go to waste if financial institutions do not develop a long-term, thoughtful and proactive program to address the talent shortage. This includes:

• Developing holistic and strategic talent retention programs
• Continuing to push the envelope in new technology
• Designing robust programs to motivate and engage employees

This will not be easy, but the current situation demands that financial services institutions take bold steps to address this shortfall.

Holistic strategic talent programs

The COVID-19 pandemic fundamentally altered organizational dynamics for many companies. It demonstrated that the future of work will no longer be a binary decision between on-site or remote working. Organizations will feel increasing pressure to adopt some form of hybrid working. The EY 2022 Work Reimagined Survey revealed that 80% of employees want to work at least two days remotely per week. While the technology industry has historically supported flexible working arrangements, some financial services organizations are still not ready to fully embrace this model.

This competition for talent between financial services, big tech and FinTech firms will continue to dominate the landscape for the foreseeable future. While bankers have traditionally commanded a clear edge in terms of offices in prime locations, status and large paychecks, technology companies are quickly closing the gap and drawing key talent away by offering more opportunities in emerging technologies such as AI/ML, blockchain, cloud and cyber.

To compete, financial services firms are reimagining workforce planning to diversify talent sources, creating a more expansive talent ecosystem through partnerships with vendors, higher education institutions and technical colleges/programs. Firms should critically evaluate their sourcing location strategy to gain access to critical skills within the US and globally (e.g., India, Eastern Europe).

In addition, financial services firms are exploring new strategies for acquiring skilled talent, including securing talent through acqui-hire or by unlocking untapped sources (e.g., neurodiverse talent). Adopting a skills-based framework for workforce planning will identify the critical future skills needed and enable firms to develop a talent strategy.

We recommend that financial services firms explore new ways to team with technology vendors to develop talent and secure access to emerging skill sets. Although financial services firms have outsourced or co-sourced talent from vendors in the past, they will now need to work even closer with their vendor network to develop talent internally and externally.

Pushing the envelope in new technology

Financial firms will increasingly find themselves unable to meet the growing demand for technology talent unless they demonstrate innovative thinking to attract, grow and engage technology professionals. Leading companies will not only prioritize attracting and upskilling the right talent but also take steps to create the right environment for talent to thrive in.

Financial institutions are beginning to focus on building a culture of innovation and creativity. In the past, financial services technologists saw themselves as protectors of the banking systems, and they focused on keeping the lights on and limiting downtime to make services available 24/7. While core banking services will always be important, technologists within banks are also asking for an innovation-led culture where they can work on pathbreaking projects, dare to think differently and operate innovation labs similar to those of big tech firms.

This will go a long way toward helping financial services firms redefine their brand among technology professionals. Banks have invested billions of dollars on disruptive technologies, with some of the largest setting aside half of their technology budget on new developments. In fact, the technology budget of some of the larger banks matches that of FinTech VC investments just a few years ago. By articulating their future vision and a technology-first focus, financial institutions can attract talent with the intention of changing the face of banking and being part of the future vision.

At the same time, financial institutions should realize they no longer need to provide a linear career path for technology employees. These employees are resilient and adept at change, with skills ranging from empathy and mindfulness to design thinking and innovation embedded in their DNA. They are driven by experience and impact, and ready to follow new models and more fluid role descriptions to keep pace with disruption.

To that end, financial institutions are creating multidisciplinary teams aligned to value streams, customer segments and products. Working across traditional organizational boundaries to improve speed to delivery, management, governance and flexibility (tech and business integration) will aid cross-disciplinary learning.

A key part of this effort will demand that financial service organizations plan ahead by assessing the current and future strength of their talent in critical areas of cloud, cyber, AI/ML and blockchain; and creating a roadmap to bridge the gaps through internal talent development and external sourcing.

Engage and motivate

Existing channels for identifying and sourcing talent have become reactive, slow, costly and competitive. This is forcing organizations to reimagine how and where to source talent to increase access to critical skills. Moreover, as technology transforms the types of activities employees do, the experiences they have, and the way employees engage with each other and develop will also change. Proactively enabling a positive employee experience will help build a high-performance culture and enable retention.

One way companies do this is through a personalized employee experience that will drive a higher sense of engagement, retention, employer brand and unique employee value proposition. Companies should identify their talent profile and the unique characteristics of their value proposition as they seek to attract and retain talent.

Leading-edge companies treat employees as the new customers, measuring their effort and experience through qualitative and quantitative means. Investing in collaboration tools and building an inclusive and empowering culture offer employees more productive and valuable environments.

A key step in this process is to define a comprehensive role and skills taxonomy that will align new roles to the operating model to drive more intermobility and effective sourcing.

Organizations can augment this by developing experience-led, personalized career paths. This will entail creating an internal marketplace of open internal roles, allowing employees to see new opportunities and design their customized career journey. Clearly mapping skills across functional families and roles will enable employees to track and engage in lateral opportunities and rotational programs.

Alternative methods of learning that are active, immersive and based on real-world experiences will play a key role in this. Companies should actively provide platforms to engage with and contribute to open-source communities (e.g., hackathons). We have seen companies provide opportunities to earn digital badges that certify new skills learned and align to roles and the enterprise skills taxonomy.

While there is a clear global shortage of technology talent, there are solutions that employers can begin implementing today to strengthen their current workforce and attract the workforce of the future. But they need to take action to address this problem now, as well as position themselves for the future.

Here is a cheat sheet for CIOs to get ahead in the competition for talent: