Can banks deal with the skills shortage ghost?

Competition for talent is fierce. Under the current circumstances, few can challenge that affirmation. 

The competition equation, if there is one, is more complex because the biggest rival isn’t out there but within a company. Attractiveness and the ability to enhance, upskill and retain existing talent need  to be added.   

All the industries in Luxembourg are haunted by the same ghost that rarefies the job market atmosphere, which is tight and crowded:  the lack of skillsets they need to remain competitive in an ever changing local and global market where technology sets the pace of change.

Finding the right skillset seems like a treasure hunt of the highest order. Accommodating new market demands for faster and user-friendly services is the goal for all industries but particularly for those who have started their transformation journey. Banking is no exception. 

Most banks in Luxembourg have already started this journey, from adapting legacy IT systems to developing new platforms for end-to-end client servicing and reviewing their value chain. 

But banks still rely heavily on stature, longevity, good reputation and solid processes and strategies. To facilitate this change and learn new ways of becoming more flexible and more technology-driven, the collaboration between banks and Fintechs continues to rise. 

Fintech solutions are fulfilling current customer needs: they are born digital, they focus on customer experience, and they are available 24/7. They don’t offer all the financial services a customer could require, but the tailored-made solutions, customer centricity and agility that make them game changers. 

However, this alliance calls for caution.

As digital-human interplay is increasing, and it will continue to in the future, banks now find themselves looking exhaustively for digitally-skilled staff, which is like finding a needle in a haystack. 

How can banks continue their digital transformation journey when they don’t have the right skillset to do it? This is why, according to our survey Banking in Luxembourg: Trends and Figures 2019, one of banks’ major concerns is the skills shortage, with 74% of banks admitting that people-hire in Luxembourg is more difficult nowadays than ever before, independently of the segment where they do business.

Will the ghost of skills shortage cause a profound crisis in the banking sector? It’s a haunting thought.

In this article, we deep dive into banks’ skills-shortage growing concern, what drives it, the challenges it raises and possible solutions to vanquish this ghost.

Why is hiring and retaining talent more difficult nowadays?

An overwhelming 73% of bankers attribute the rising difficulty of hiring to the short supply of skilled workers, according to our study. At the same time, 55% of them recognise that the skillset requirements in the banking industry have changed over the past years, making industry-specific skills more desirable

As technology continues to take over operations, “ways of doing” and even business models in all industries, one can only keep up with it when talent is both flexible and digitally-savvy.

These specific skills might be a possible cause for this rise of hire difficulty, bankers point out.  These said skills aren’t only in IT-related roles such as data analysts, data scientists and cyber security officers, however. It also covers areas of compliance, risk management, front-office and internal audits. However, there’s also a consideration for soft skills, like creativity, empathy, leadership and communication, to create a balance with the digital world.

Compensation expectations also play a role as certain profiles expect a better package in the context of rising talent demand and skills shortages. In fact, the compensation issue ranked as the second most important within banks involved in asset management.

On the other hand, the view on banks in general is different than before. Players in Retail Banking believe that not only the candidates’ view of the banking-industry reputation has dropped, but also that working for a bank is no longer the first choice for them.  As a result, reputation became the third most relevant reason why hiring workers in Luxembourg has become more challenging.  

On this perception change, the CEO of a retail bank commented that, especially for the younger generations, working in banks may not be as appealing as it once was. Young employees tend to stay in the bank for three to four years before moving on— either internally or externally. These millennials come with a different mindset than previous generations. In fact, they’re more interested in working on challenging projects than looking for a linear or classical banking career.

Another reflection is that, due to over-regulation matters, banks find themselves primarily searching for new employees in the Compliance (55%) and Risk Management (40%) departments.

The importance of client relationship in the banking industry is further evidenced by Customer Advisor completing the top three departments where bankers are talent-searching the most. 

Now, here is the interesting bit. Despite digitalisation efforts, having a personal relationship with clients is still key for many banks. Hence the reason that banks doing business in the Asset Management and Private Banking segments, with 70% and 61%, respectively, look mostly for front-office hires.

How to go about the skills shortage

As we previously mentioned, competition for talent is fierce and it’s now a vastly accepted notion that the workforce of the future will need to embrace change as a constant— ironically—be more flexible, and learn new skills while unlearning old ones. 

Hiring young graduates might bring new competencies to the table as they have the ability to adapt to change more naturally. Creating liaisons with universities and establishing a pipeline of candidates may be ways of accessing that talent pool. 

However, the growing competition within the industry adds pressure and challenges.  The banks’ response to this reality differs even more when considering the challenges created by new sectors such as payment services. 

To retain young talent, banks could consider suitably-tailored packages to their employees’ needs with competitive salaries, and programmes made to re-energise their careers, for example with rotations across functions and geographies within the organisation, and flexible ways of working, like working from home.

These aren’t the only solutions, however. 

To close potential skills gaps, banks show a propensity to hire but mainly to retrain their staff, leveraging on upskilling. 

Upskill me, don’t fire me

Upskilling then, can play a major role in meeting those emerging demands. Most bankers believe it’s the way forward, and a way to motivate employees to embrace change.

In Luxembourg, approaches to upskilling vary. For certain players, it is more systematic and company-wide in nature. Others prefer a group of focused initiatives. Some even have in-house training while others leverage on third- party programmes like Luxembourg Digital Skills Bridge— or a mix of both. 

Despite all the different approaches, banking competitiveness could be fueled by upskilling. 

As banks review their value chain by outsourcing non-core services and offshoring support and non-added-value tasks, the skills needed in Luxembourg will be more focused on oversight and problem solving than on execution. 

Upskilling can be the differentiator when meeting those emerging demands. While some bankers believe that upskilling has its limits, they are also very much aware that it’s the way forward to entice employees to become the workforce of the future.

What we think

Roxane Haas, Partner & Banking Leader at PwC Luxembourg

The competition and search for talent is growing and the job market is as competitive as it can get. The need to upskill has never been more important than it is now. While banks look beyond Luxembourg’s borders for talent, they are also very much aware that upskilling is the way into the workforce of the future. Ready to embrace change, be more flexible and open to learn new skills and unlearn old ones, these individuals will push banking and other industries to new heights.

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