Digital transformation in banking requires a future-ready workforce

Technology and consumers are changing finance. A future-ready workforce is a key element to a successful digital transformation in banking.

Digital transformation in banking requires a future-ready workforce

Technology is transforming nearly every industry. Constantly-advancing digital tools and changing consumer expectations are pushing organizations to put technology at the heart of nearly all aspects of business operations. This is happening at a rapid pace, especially in the context of the COVID pandemic.

“The current environment is undoubtedly challenging for banks,” notes the team at banking software development company Temenos. Banking institutions are now expected to deploy new technologies into all areas of their business. That pressure to go digital is being applied by two main sources — technology companies and consumers.

Technology companies are paving a digital path forward

Banks are no longer in competition only with each other. Because of their innovation-driven business models, financial technology companies and other tech giants are now some of banks’ biggest competitors.

“In the context of competition for banks, it’s not really banks anymore,” says Michael Ruttledge, chief information officer and head of technology services at Citizens Bank. “It’s FinTech organizations and large tech companies like Google, Apple, and Amazon that are delivering at speeds we have to compete with.”

It’s that speed of delivery of new technologies that makes tech companies such a big threat to banks.

“The rapid evolution of technology,” writes Kevin Wack, national editor at American Banker, allows “data-savvy bank partners to siphon off a larger share of revenue while relegating the banks to a behind-the-scenes role in customer relationships.”

Under these conditions, the only way for banks to sustain or grow their positions in the market is to accelerate their digital transformations.

The part consumers play

Technology is also contributing to the change in consumer expectations regarding the way banks deliver their products and services. “The financial industry is undergoing a sweeping transformation due largely to changing expectations and preferences among consumers,” explains Gerrard Schmid, president and CEO at banking solutions and retail technology systems provider Diebold Nixdorf.

The rise of digital tools gives consumers the ability to bank anytime, anywhere, and digital banking channels are quickly becoming the rule rather than the exception.

It’s a trend that intensified during the pandemic when people had to rely on those digital channels to conduct banking business. “Lockdowns and social-distancing regulations restricted access to branches and forced many customers to sign up for online or mobile banking for the first time, and most of them liked what they found,” write Boston Consulting Group’s Thorsten Brackert, et al., in a report on global retail banking.

As the use of digital channels continues to increase, banks will have to invest more in digital solutions. “Within both new and established bank branches, digital transformation is inevitable,” asserts Schmid.

Curving asphalt red and white curb of a race track; digital transformation in banking concept

Banks are behind the curve in digital transformation

Yet, even as the pandemic has highlighted the necessity of doing so, nearly one-half of banks surveyed by Cornerstone Advisors in 2020 still hadn’t invested the resources necessary to transform into digital-first institutions. Furthermore, only about 24 percent were prepared to launch their digital transformation strategy in 2021. “Most banks have a long, long way to go toward becoming digitally-transformed,” notes Ron Shevlin, chief research officer at Cornerstone Advisors.

And it’s imperative that they start that journey sooner rather than later to remain relevant and competitive.

Our study on banking transformations shows that for digital transformations to be successful, banks need to focus on three key areas:

  • Adopting the latest technologies. Banks must integrate the latest digital technologies into all areas of the business, upgrade existing processes, and change the way they work to fit the demands of technology.
  • Fostering a digital-first culture. Going digital isn’t just a change in the way things are done; it’s a change in the way people think about doing things. Banks need to create a growth mindset and foster a culture of trust, collaboration, and ownership that helps to usher in a digital-first culture.
  • Building a digital-savvy workforce. People are the drivers of transformation. Banks must ensure they have the right digital-savvy leaders in place as well as build capabilities for their workforce of the future to enable employees to work in new ways.

The last point is especially critical to success. “The skills needed for embarking on a digital transformation journey most likely do not exist in sufficient numbers in most financial institutions, making talent management and employee reskilling particularly important,” writes Jim Marous, co-publisher of The Financial Brand and CEO at the Digital Banking Report.

Time-lapse photograph of rocket launch; digital transformation in banking concept

Banks must build the workforce of the future to carry them through their digital transformation

People are key to the success of a digital transformation, yet most banks don’t have employees in place with the right skills to meet the demands of going digital. The implementation of technology is creating two key challenges for HR teams trying to build a digitally-savvy workforce — defining new roles and closing skills gaps.

Roles in banking are changing alongside the adoption of digital tools

As the adoption of technology grows, the roles at banks are shifting. Front-office roles are declining in prevalence while IT roles are on the rise. That’s because banks need people in those positions to guide their digital transformations and operate banks in their future states.  “The bank of the future will require new skill sets for higher-order work,” write Deloitte’s Mark Shilling and Anna Celner.

As “traditional teller positions and paperwork-heavy jobs in loan processing have declined, banks have hired new armies of technologists, cybersecurity experts, developers, and data analysts,” explains FirstBank CEO Jim Reuter.

This change in roles at banks has created skills gaps that HR teams are struggling to close.

The rise of new roles is creating skills gaps at banks

The skills mix for roles is evolving fast, with additional skills “needed to ensure digital solutions are designed with a consistent and connected customer and employee experience in mind,” write Karen Parkes, Rebecca Stockley, and Tim Payne with KPMG International. The problem is that banks haven’t traditionally needed people with those skills, and are experiencing skills gaps inhibiting their ability to implement digital transformations.

According to PwC’s 22nd Annual Global CEO Survey, most banking and capital markets industry CEOs believe this gap in skills is “undermining their organisations’ ability to innovate effectively and provide a winning customer experience.”

Not so at FinTech companies, which is one of the key reasons why they have a competitive edge over banks (as described in this report). Whereas banks traditionally focus on building strong customer-facing teams, FinTech companies employ a digital-first strategy with a focus on building strong IT departments. This gives them a skills advantage over banks and enables them to build a future-ready workforce.

To overcome this obstacle, banks first need to identify those skills gaps, write Julien Courbe, et al., at PwC. Then they can transform their organizations from a current state where innovation isn’t a priority to a future state focused on talent management to drive innovation and collaboration.

Once the skills of the future are identified, HR teams can upskill and reskill the current workforce to develop those skills, calibrate roles for the future with those skills, and use those skills to develop a hire-for-potential approach to talent acquisition. Doing so enables banks to build the workforce necessary to be successful in their digital transformation.

Images by: Quang Nguyen Vinh, abdulrazaklatif/©, ivanzkart/©

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