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Upskilling for digital transformation in the banking industry

Upskilling for digital transformation in the banking industry

Written by:
Gregor Towers
Date created
August 23, 2023
Last updated:
April 7, 2024
5 min read
Table of content
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Key takeaways

• Banks are innovating their services and operations by integrating more technology and upskilling their talent for digital transformation.

• Fintechs are bringing new digital assets to the market, offering faster online payments and personalized services to customers, shaking up the banking industry.

• Traditional banks need to compete with fintechs by modernizing their technology, improving customer services, and sourcing talent with leadership skills.

• Financial institutions need to focus on customer interaction skills, compliance with regulations, and leadership development to dominate the industry and provide attractive services.

• Banks have the potential to regain dominance in the financial sector through digital transformation, investing in talent development, and leveraging existing assets and capabilities.

Banks are innovating their services and operations. As they integrate more technology, traditional and digital banks need to ensure their talent has the right skills for digital transformation.

Fintechs are bringing new digital assets to the market. Faster online payments and increased control over finances offer an attractive and personalized service to customers.

Traditional banks are innovating their products and operations to compete. However, built on 30 years of outdated technical processes, transforming their product time to market and customer services is complex.

As banks develop strategies for digital transformation, they also need to train talent to optimize operations, comply with new regulations and address customer needs.

Download your upskilling checklist for the banking industry

Traditional banks are looking for new growth avenues

Traditional banks have reasons to be optimistic. They have built up significant resilience since 2008 and as a result, their growth has started to rise.

Banks’ return on equity (ROE) from 2000 to 2022

While they enter a new period of growth, the state of banks’ future  remains critical with the likes of Credit Suisse and Silicon Valley going under. And more will follow as banks’ Return on Equity (ROE) is expected to crash below 7.2% by 2030.

As banks look to find new growth in digital transformation, they have to look at market competition to innovate their services and upskill their talent in the right way.

Fintechs are shaking-up the banking industry with new technology

Banks are the backbone of economies. Traditional banks offer vast pools of capitals to support businesses and households. With economies reliant on their funds, banks have focused on keeping their balance sheet in check.

Despite reaching global assets of $370 trillion, banks’ product offering has hardly changed in the past 30 years. Their lack of product development created a market gap for new financial platforms to rise with a focus on sales, also known as fintechs or digital banks.

Fintechs function more like tech companies as they develop and bring new services to the banking industry for greater profit:

The average age of IT applications across industries

With over 80% of fintech activities concentrated on payments, consumer lending, and wealth management, they are using tech to address specific customer needs and launch new products quickly.

In comparison, the average bank has 3000 products, only 30 of which are needed to serve 60 million consumers. This backlog means traditional banks’ are unable to update product features and serve customers as efficiently.

Digital transformation caters for customers’ banking demands

With competition from fintechs, banks are connecting their tech and business capabilities to start digital transformation. CIOs, CTOs and CFOs are looking to modernize their technology to enable rapid product releases, shorter time to market, and reduced operational costs.

Most important technology areas to financial institutions

With the example of IDEAL and Tikkie  in the Netherlands, banks are already investing in customer services to create a more attractive service.  

However, for banking executives to transform systems further, they need to look at why customers are opting for fintechs’ services.

Customers cite pricing and customer experience as the main reasons for banking with fintechs

Fintechs are prioritizing products that serve customers with convenience and agility. They are capturing a younger generation of customers and leveraging digital channels to interact with customers two to three times more frequently than the average bank.

But despite the tech differences between traditional banks and fintechs, they both face similar challenges: continuously innovating their services, competing for the same customers and dealing with financial regulations. Therefore, they also need to source the same talent to stay competitive in the banking industry.

Financial institutions need to source talent with leadership skills

As banks and fintechs hire more tech talent with key skills for banking operations, they have to find the right leaders to guide their teams through change.

In traditional banks, tech teams are siloed and employed for one-off projects, racking huge technical debt. Now with banks placing tech talent at the center of digital strategies, they need leaders who can grow the tech specialists developing new services.

But banks and fintechs will face competition in sourcing leaders. As financial institutions search for the same leadership profiles, the size of this talent pool will shrink considerably.

Therefore, traditional and digital banks will have to internally develop talents’ skills for leadership roles. They will need training to develop leaders with communication and decision-making skills to maintain their tech teams’ motivation and manage project stakeholders.

But for the global banks built on traditional hierarchies, that requires offering global leadership upskilling for different seniority levels: from first-time leaders to executives. Banks can therefore upskill leaders at different career stages and internally nurture a leadership pipeline to increase leadership retention.  

"I would pick out a few skills which are becoming more and more important. Examples are Leadership & Social Influence, Environmental Stewardship and Data Literacy."

Jean-Paul Paumen, Senior L&D Consultant at Rabobank

Customer interaction skills are key to compete for clients

With banks and fintechs developing digital services to serve customers, talent must learn new interaction skills for specific contexts. For example, talent will need communication upskilling to consult customers in online and offline settings.

And closer customer relationships will also demand new skill sets to manage tighter regulations. Requirements such as Know Your Customer (KYC), demand an investigative mindset and problem solving skills to verify customer identities and prevent fraud. Banks that fail to equip talent with the adequate skills to manage Anti-Money Laundering (AML) will receive substantial fines and lose customer loyalty.

Banks can dominate the industry with leadership & customer service skills

Financial institutions are investing in digital transformation to compete in the industry. While fintechs have the technological advantage, traditional banks are in a strong position to innovate.

Banks built deep levels of resilience into their systems and people during the pandemic; they developed digital assets, adapted to the fall in cash use and their workforce responded to digital banking. They are able to innovate their technology and support  their talent through change by investing in leadership and customer interaction skills.

Fintechs can expect banks to regain their dominance in the financial sector. As banks progress in digital transformation and rethink their talent’s banking skills, they will profit from new agility in their people while leveraging their existing assets and capabilities.

Regardless of the competition, all financial institutions need to support their talent with leadership, customer communication and resilience skills to optimize digital transformation and provide the most attractive services in the market .

Download your banking industry upskilling checklist

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