Once simply a buzzword in the financial sector, FinTech has grown to be a considerable force in the financial industry. FinTechs, groups that create and use technology to augment and digitize traditional financial services, have become the newest and most ground-breaking industry disrupter. Traditionally nimble start-up firms borne out of a need for innovation and necessity, they have since graduated to highly attractive employers enticing many to switch industries and jobs – most often coming from financial institutions.
Some might blame the ‘great resignation,’ but the truth is that top talent has been slowly migrating to FinTechs in droves since after the 2008 global financial crisis. Over the years, this shift has become more and more evident, with the COVID-19 pandemic bringing it to the forefront with massive employment shifts across many industries. According to Forbes FinTech 100, FinTech companies are most prevalent in payments and transactions, lending and credit, and wealth and brokerage while they are growing in other financial spheres, including blockchain, mortgages and neo-banks.
As FinTech continues to grow at its current pace, the future of traditional banking will soon be completely flipped on its head – where banks may become the regulated backstage setup for the FinTech industry. If banks and other financial institutions wish to retain top talent as well as attract new talent, it’s important to understand why personnel are moving to FinTechs and what steps can be taken to quell the flow.
The FinTech Appeal
Excitement and Intrigue in the FinTech industry
Bright minds are attracted to thrill and intrigue, and the FinTech industry provides them with cutting-edge, innovative work environments where they can break boundaries and explore the world of technology and finance. The opportunity to work on and with advancing technology makes working in FinTech highly exciting and stimulating. The FinTech industry also allows and encourages employees to find new opportunities and to forge new paths in a somewhat antiquated system. Here, calculated risk taking is expected and status quos are meant to be broken.
Lowered Risk and Highly Publicized Valuations
One of the biggest factors driving the shift to FinTech is the decreasing risk in the FinTech industry. FinTech has seen steady growth and meteoric rises with companies like Klarna recently reaching a valuation of over $31 billion in 2021. Long before the COVID-19 pandemic, some of the brightest minds working in the financial services sector saw the rise of entities like Square, created by Jack Dorsey of Twitter fame. Klarna and Venmo acted as verification of their assumptions – that FinTech was fast becoming a stable and profitable sector, ripe for an influx of seasoned financial sector veterans.
Creativity & Ubiquity
FinTech is everywhere and continues to permeate our day-to-day lives. In one day you might use an app on your phone to scan and deposit a check, open another app to balance your budgets across multiple banks and accounts, request transport by using a ride sharing service, and later, order late night eats using a food delivery platform. We’ve not only become more accustomed to their presence, but have been delighted in their very existence and the simplicity and ease at which our daily lives have improved. This general appeal and access to creativity has been very attractive to many who want to be on the cutting edge of whatever is next.
Remote Work and Hybrid Opportunities
The FinTech industry also owes some of its success in attracting and retaining top talent to the hybrid workplace setup. Even before the COVID-19 pandemic hit, some FinTech companies were offering flexible time-off policies and unlimited annual leaves, thus providing a very flexible working environment to employees. After the pandemic and amid the ‘great resignation’, people began to leave their major cities and homes to lower cost areas and work for companies that offered remote work opportunities. Now, as we enter into a post-pandemic world, it is mainly FinTechs willing to continue the remote setup while traditional banking organizations are already planning to have their employees return to the office. Understandably, there are many good reasons to have employees in physical offices, however, as employees have adjusted to and enjoyed the work-life balance remote working offered them, some are unwilling to go back.
Competitive Employee Packages
As noted above, a significant amount of capital is flowing into the FinTech industry, supporting and sustaining its growth. With this financial influx, FinTech companies are able to attract top talent and retain them through highly competitive employee packages. Most FinTech employees are enjoying the same perks as those of highly compensated traditional bankers, along with the benefits of a hybrid work environment, increased work-life balance as well as non-traditional perks like on-site chefs, complimentary meal services, and quiet nap rooms – not typically found in the traditional financial sector.
So What Can Traditional Banks Do to Stem the Flow?
All is not lost. Traditional banking can certainly emulate what is taking place in FinTech and embrace some changes in order to retain top talent. Here are some key suggestions:
1. Recognize your company’s strengths
FinTech’s growth doesn’t intend to downgrade traditional banking in any way. In fact, FinTech sees traditional banking as a platform open to innovation and relies heavily on the expertise of banking individuals. The banking sector should realize this strength and take on a more people-centric approach.
Also, employees are attracted to banks because of the huge variety of opportunities, possibilities for early responsibility, rapid career progression, long term stability, opportunities for growth, great benefits, financial remuneration, plus excellent working conditions and hours.
It’s important to recognize the visible post-pandemic shift in the thought process and values of the average employee. Potential employees are now looking for jobs that would give them more thrill while providing access to more benefits. Thus, traditional banks need to emphasize their key strengths if they wish to survive this industry’s revolution.
2. Evaluate your weaknesses
Banks need to set up new evaluation systems to figure out where they are lacking in terms of employee retention. Exit interviews, for instance, are a great way to identify why an employee is resigning and learn more about what they wish to see in their ideal employer.
Right now, small-scale FinTech companies are directly competing with banks, as well as tech giants like Amazon and Microsoft for relevant talent. These sectors especially need to formulate unique techniques to offer their employees great value. Flexible work opportunities and remote working setups are a great way to hire and retain diverse talent that lives far from the head office location.
3. Partner and Engage With FinTechs
Banks have access to enormous financial resources to support and encourage creativity in developing new ways to solve problems. Rather than ‘compete’ with FinTechs, create divisions or groups that actively seek out ways to work with existing FinTech groups.
Partnering with agile, innovative FinTech services will not only enhance the banks’ service offerings but provide career opportunities for existing employees seeking more innovative positions and approaches to traditional banking. In partnering or investing in FinTech innovation, financial institutions are able to position themselves for future growth and adaptation through real-time, easy access to products, services, data, and channels. It also showcases the bank as being digital first and forward thinking and helps with future-proofing the organization as a whole.
Banks can also create digital divisions in house, pulling together the most innovative of employees. However, partnering with a FinTech company can be a more efficient and more financially appealing way to get the technology needed – fast.
Consider Employee Value
At the end of the day, one of the simplest ways to retain talent is to make your employees feel valued. When employees are not recognized for all that they bring to the table, they tend to take their value elsewhere where their efforts and ideas will be appreciated. As a result, successful organizations will always reward their employees with incentives, be it bonuses and compensations, and provide them with the necessary tools to drive personal growth. This growth will not only be seen at the individual level, but also across the company overall. It’s a win-win culture for everyone.