- Financial services businesses are struggling to keep up with the skills needed in the post-pandemic era.
- The impact of COVID-19 and new entrants to the landscape mean that disruption has well and truly arrived.
- Upskilling and reskilling should be supported by collaboration, data, and an in-depth understanding of the different forces at work.
As the worldwide vaccine rollout signals the start of the post-pandemic era, businesses are faced with the prospect of emerging into a world that has decisively and permanently changed. The COVID-19 pandemic has led to many significant innovations in the way financial services (FS) businesses operate and has undoubtedly accelerated the digital transformation agenda beyond all predictions. This has required FS businesses to respond with agility, placing a greater focus on their most important asset: their people.
In this rapidly changing business environment, however, financial services businesses are struggling to keep up with the growing need for new skills and capabilities in the workforce. Globally, the FS industry accounts for about US$22 trillion of revenues, and this is expected to grow.1 The sector employs more than 6.3 million people in the US2, more than 4 million in China (as of 2017)3, and 1.1 million people in the UK.4 But according to the latest Future of Work 2020 report, published by the World Economic Forum, one in five of all jobs in financial services are at risk of disappearing, and half of all FS employees can expect to see their jobs change.5
This is the definition of disruption, and the FS industry is not prepared. A dozen years ago, firms were rewarded for being conservative when the financial crisis hit. Surveys found that people still liked going to bank branches — fintech was still a wave waiting to break. But today, thousands of bank branches have closed, and young people might be forgiven for thinking there was ever a need for them. Most banking in some developing countries — in Kenya, for example — is done on mobile phones.6
Add to this the constant flow of fintech players and other new entrants with less institutional inertia — and, in some cases, lower regulatory constraints — and it’s clear that FS firms need a radical upgrade in terms of their internal skills. The message may be sinking in. According to PwC’s 24th Annual Global CEO Survey, 35 percent of financial services CEOs said they are focussing on the skills and adaptability of their people. That is an improvement on last year’s survey when only 17 percent said their organisation has made significant progress in areas such as improving workers’ and leaders’ knowledge of technology. Indeed only 24 percent said that upskilling programs have led to greater innovation and an accelerated digital transformation (compared to 30 percent of CEOs across all industries).
It could be different. According to research published by the World Economic Forum and PwC, the financial services industry could see a US$263 million boost to global GDP if there were upskilling that closed the current skills gap, with the biggest gains coming in the US and India.
Hard and soft skills needed
Rapidly evolving technology, regulatory constraints, and relentless pressure to hit short-term financial targets may be hindering firms from making needed investments to upskill their employees. These employees also face critical skills gaps in areas such as empathy, resilience, adaptability, and creative problem-solving. Turnover is a factor as well — firms may resist investing in bespoke training initiatives that increase the market value of their people, who then leave and take their enhanced skills profile with them. Such programs are expensive and have an uncertain ROI.
COVID-19 has exacerbated the problem by accelerating new consumer behaviours that in turn spur new ways of working. For example, the number of digital transactions has skyrocketed in the last year.7 But firms must transform today to secure a future for tomorrow, and no company or person is immune.
The challenge to upskill so many people is so significant that firms may not be able to solve it by working independently — though many have started that journey. For example, in 2017, Citigroup announced a partnership with Cornell Tech to develop digital talent in the New York City labour market.8 But a market-based, go-it-alone approach may be too slow, or risk leaving small firms behind. It behooves industry-wide associations and trade groups to create the right foundation to help all firms in a country to close the skills gap, leading to faster progress at a sector level.
Setting a good example
In a small number of countries including Singapore, Luxembourg, and Australia, governments and industry bodies have stepped in to create skills platforms. They offer a model for how other countries can take similar steps.
Singapore, for example, has a significant mismatch between jobs and skills in the region.9 More than half of Singaporeans believe that their jobs will be made obsolete by technology in the next 10 years. Analytics and automation will have a huge impact on the country’s financial services sector in the next several years.
Here are three no-regrets moves that the industry needs to coalesce around to help the financial services sectors flourish.
Collaborate, collaborate, collaborate: The challenge faced by financial services institutions to upskill and reskill their people is massive. Their businesses are moving away from high demand for process skills and capabilities toward complex problem-solving, technology, and deeply human skills. And for most firms, it’s a transition that cannot be solved alone. Whether that is collaboration with government, higher education, industry bodies, peer organisations, or other industries, all options should be considered in order to support the upskilling and reskilling of financial services talent.
Dig deep into the data: There are a lot of organisations driving hard to introduce training and development programs without deeply understanding the data. Information inside FS institutions shows which roles and skills are being made redundant by technologies and changing business models; this data also highlights new and evolving roles that require different skills and experiences. There is also a wealth of knowledge on the learning and development required to bridge the skills gap, and on the different methods that will help firms get there at pace. For example, ideas such as learning in the flow of work (i.e., learning that fits in with the work people do, rather than being a task separated out from the workday)10 are becoming new models for accelerated learning to bridge skills gaps.
Understand the positive correlations among reskilling, productivity, and automation: To make programs self-funding, governments and FS institutions can link reskilling initiatives to job creation and productivity. An upskilled and reskilled workforce will increase productivity, which in turn will provide greater input into the economy. The economic modeling that PwC has done on the benefits of upskilling confirms that this is an investment that not only pays for itself but adds to overall GDP across sectors, and FS is no different. Furthermore, the relationship between automation, productivity, and reskilling is clear, and COVID-19 has indeed focused corporate minds.11 For example, a recent survey in the US of 400 people who worked in a variety of companies showed that 91 percent of companies that had stepped up their upskilling efforts had boosted productivity.12
At a time when interest rates are low, and the complexities of the pandemic are putting pressure on costs for financial services, building the case for change is critical. Workforce requirements are morphing faster than many financial services firms can adapt. Given the industry’s importance in overall national economies, governments can — and must — step in to work with the FS industry to find long-term solutions to upskilling and reskilling to bridge the skills gap.