How is COVID-19 impacting on your digital transformation workforce?

Do you have the right team in place?
From April this year at the outset of the COVID-19 lockdown, River Partnership interviewed 92 digital leaders across Financial Services firms to understand the impact on digital transformation programs and to examine the key human capital considerations.

There is no doubt now that COVID-19 has accelerated the implementation of digital strategies and transformations. Many FIs now find themselves asking if they have the right digital skill sets in their organisation to thrive.

Matt Fitzpatrick, the founder and leader of McKinsey’s Financial Services Lab, states that transformations that would have once been mapped out in one to three year phases are being scaled up in a matter of days or weeks and digital channels are now the primary, and in some cases the sole, customer engagement model.

Many neobanks and payments companies have seen demand increase rapidly which in turn has led to a spike in hiring and a small-scale talent skirmish for certain skills and experience. PayPal and fast growing insurgents like Transferwise and Revolut continue to recruit in significant numbers against a back drop of large Banks and other Tech firm recruiting far fewer people - 31% of UK Tech is retrenching yet according to the Thinknum job posting database. PayPal job slots have more than doubled so far this year, including for its analytics team as PayPal aims to better understand the rearrangement of societal norms.

TransferWise says it has taken on over 70 staff during lockdown, recruiting them remotely. The recruits primarily being in engineering and analyst teams.

Having the right team in place is crucial to execute on your digital transformation strategy says McKinsey in a paper from April.

Digital Skill Sets in High Demand:

A recent McKinsey survey results suggest that success is more likely when organisations scale up hiring and talent development, with 27% reporting successful transformation when their companies set hiring goals based on digital skill needs. This is 2x organisations who did not.

This research is further backed up by EY and Microsoft’s recently published Digital Directions report highlighting companies with established digital strategies report higher operating margins.

According to a CIO survey by The River Partnership two thirds of CIOs (64%) reported a shortfall in talent. Russ Riggen, a Partner in FS at PwC, comments that “as industry disruption accelerates, the skills in highest demand evolve and talent expectations become harder to meet”.

We examine key market trends:

Cyber Security:
The increase in digital interactions has created opportunities for financial crime. This can cause huge damage to an organisation’s reputation and brand name and will lose the confidence and trust of their customers. Following a survey by the River Partnership, we found that many organisations are not equipped to deal with this:
  • 80% of cyber leaders fear imminent threat of cyber-attacks.
  • 51% of leaders said their organisation is at moderate or extreme risk due to staff shortages.
  • 68% of organisations had tried and failed to hire talent into a cyber leadership role within the last three years.
  • 35% expecting to commission searches in the next two years
According to Anton Ruddenklau, the Head of Digital and Innovation at KPMG, FinTechs are well placed to weather the COVID-19 storm due to their lean operating models and structures with their total cost of operation being as much as 70% lower than legacy banks with a large brand network.

Harrie Vollard, the Head of Rabo Frontier Ventures at Rabobank in the Netherlands, agrees with this theory in his recent article that forced exposure to fintech and digital banking apps will sharply increase the number of converts and further enforce the position of fintech companies with the  lockdown enabling them to prove their value to customers.

Live examples of this already being seen, as players across every vertical from payments to insurtech meet the accelerated demand for digital; digital payments company Stripe announced a $600m funding round last month and Amsterdam-based Adyen’s share have jumped 36% this year, whilst in the US, PayPal and Square have seen 33% and 26% increases in share prices respectively.

As these FinTechs continue to flourish and grow, they will compete against larger corporates to attract digital talent.

To further examine the appeal of the FinTech sector to potential candidates, The River Partnership has surveyed 245 candidates on their career motivations and perceptions in the market following COVID-19. Our key findings are as follows:
  • 87% would explore a new role with a large digital commerce platform.
  • 75% would be interested in a consumer tech giant.
  • Whilst only 35% of candidates would consider a legacy institution.
To summarise, while legacy institutions will not die, they must move in the right direction to be successful.

Female Leadership:
Only 5% of the current FTSE 100 CEO’s are women, with the FTSE 250 being even further behind with only 2% of businesses being led by a female.

Digital advancement caused by COVID-19 has dispelled many myths about working from home and organisations have completely revised their attitudes to remote working. This shift in modus operandi highlights that women can participate actively throughout the entirety of their careers. As Avivah Wittenberg-Cox put it, it’s time we recognised the powerful potential of gender diversity in positions of leadership and elect more women.

In light of COVID-19, 62% of the 92 digital leaders interviewed by The River Partnership have recently adopted an agile methodology to improve customer experience. The Australia and New Zealand Banking Corporation (ANZ) CEO Shayne Elliott commented that COVID-19 has “clearly impacted” their performance and they are “working to develop a more agile and resilient workforce to support customers”.

He has previously commented that ANZ take inspiration from tech giants Google, Spotify, Amazon and Apple in a bid to quickly respond to changing customer behaviours, engage and empower staff and improve efficiency.

Out of the 62 digital leaders we interviewed that are using an agile methodology, only 48% said they had the relevant skill sets within their organisation. A COO at a global investment bank commented that “agile” skills are an area of weakness within the financial services industry and historically banks have had the attitude that management runs the business and technology people deliver change to them.

Financial institutions that can attract the best agile talent will be able to execute and scale change programs and will be the real winners.

Competing with Other Sectors:
Looking at the MBA talent pipeline, we can see the issues financial institutions have in attracting the next wave of top digital and technology talent. From the 2019 class of Haas School of Business University of California Berkeley it was found that:
  • 32% landed jobs in the technology sector
  • Followed by 24% in consulting
  • And only 17% in financial services
We can see from the above data that Banks need to improve how they recruit the necessary talent, as they can no longer rely on the promise of big money to attract candidates. In recent years the average starting salaries for MBA grads in tech and financial services only differs by a few thousand pounds.

According to PwC’s 2019 report on ‘Financial Services Talent Trends’ as the digital transformation movement sparks a fresh wave of innovation potential employees are driven by “purpose driven companies” that make a difference and provide new offerings for their customers, which is especially relevant during and post COVID-19.

The world has changed dramatically since the outbreak of COVID-19. Looking into the future, financial institutions will have to continue to adapt and evolve to deal with changing circumstances. There will be a need for more digital transformation and those that embrace this and build a team with a diverse mix of skill sets and experience will be best placed to deal with these changes.

As Anirban Rose, the CEO of Capgemini’s financial services practice, commented, “businesses will evolve and emerge from COVID-19 in different and profound ways. There will be a greater need for digital experience, and this will require people”.

To download full whitepaper please click here: How is COVID-19 impacting on your digital transformation workforce.pdf

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