Banks are going beyond acquiring and using technology from the likes of Google, Microsoft and Amazon by recruiting the brains to enable them to think like the tech giants.
Few industries can compete with Silicon Valley’s biggest in terms of salaries, but banks can, and are.
Santander, for example, is continuing to populate its senior management teams with executives from the IT supplier sector. Its latest recruits in the senior tech team include former Amazon executive Sebastian Gunningham, who has been appointed vice-chairman of digital banking subsidiary Openbank.
At the same time, Francisco D’Souza, co-founder of IT services giant Cognizant, was appointed group strategic adviser for the development of Santander’s global IT platform. These followed an announcement in March 2019 when the Spanish bank recruited Aiaz Kazi directly from Google as its chief platform officer.
Banks have for a long time been huge IT organisations, with the biggest often recruiting more IT professionals than the major IT suppliers.
But a change in recruitment practices was brought on by digital transformation and the need for banks to keep pace with a changing tech environment. Today it is more about recruiting senior thinkers rather than foot soldiers and the people that fit the bill often work for the tech giants.
Gareth Lodge, analyst at Celent, said banks have always been IT companies that offer financial services, but the ethos within is changing. “It’s more a realisation that effective IT can be a competitive differentiator,” he said. “Until now, many banks have seen IT as how they deliver products.”
One IT professional in the financial services sector agreed there has been a change in mindset, with banks realising they are increasingly IT-driven and happen to sell financial services. Now, through recruitment, they are “looking for inspiration on how to do that better”, he said. “It has taken banks a long time to accept that IT is no longer a painful cost to be outsourced and is the key to their future.”
The need for a new approach to IT will require more recruitment from outside the banking sector because the tech-savviness of parts of the industry might be overestimated, according to David Bannister, analyst at Aite.
The retail and business banking sectors are most in need of changing their mindsets, he said. “They have never been particularly tech-oriented and are being forced to rethink because of real-time payment systems and API [application programming interface]-based open banking regulations.”
Changing people will change mindsets if they are given freedom to express themselves. But it is more than just becoming a Google or an Amazon, but learning how they approach tech challenges and applying those methods to banking.
If banks are to prosper, or indeed survive, they do not have a choice when it comes to digital because customers will vote with their feet. If a bank’s competitor enables customers do everything as seamlessly as a Google or Amazon but it doesn’t, it won’t be long before the first bank has no customers.
But there is a balance to be struck in the banking sector and banks need to think like Google, not just copy it.
Celent’s Lodge agreed that it is more about learning from the big boys and combining this with what the banks already have – and this is where tech industry executives can help bridge the gap.
“I’m always reminded of a quote attributed to Einstein: insanity is doing the same thing over and over again and expecting a different result,” said Lodge. “I think therefore to differentiate between banks, they need to try something different. Given the increasing threat from tech firms, understanding how they operate and positioning will help banks respond.
“But I don’t think banks should just copy Google – both the banks and Google have their own strengths and capabilities that the other cannot easily copy. I think it’s therefore more learning from, than thinking like.”
But what do the Silicon Valley types bring to banking? The answer to this question reinforces the need to blend these professionals with those that have experience in the banking sector.
According to Lodge, the software development process they are used to is perhaps the most overt difference between the two groups of professionals. “Banks focus on only releasing fully baked, fully tested software, while fintechs will often beta test with early releases,” he said.
Banks can’t just copy this, but can learn from it. Banking IT is more constrained by budgets, legacy systems, operational processes and controls, regulations, risk management, audit, security and complexity of systems. The consequences for a bank failing are probably worse than for Google, so banking IT people are probably more cautious and risk averse.
“While there are probably instances where ‘fail fast’ could work, given the regulatory environment that banks work in and their very high visibility, the banks are unlikely to be able to change too radically,” said Lodge.
Aite’s Bannister said it is also vital that IT professionals understand the regulated context in which banks operate.
Balance of skills
So a balance of skills and experience is required if banks are to continue to move in the right direction on their digital journeys. To achieve this, they will need more experts from the tech supplies industry and recruitment from it will continue, according to one banking IT professional. “If the skills and experience fit with what the banks are trying to do, there will be more recruitment,” he said. “I expect we will be calling the banks ‘tech giants’ in a few years.”
According to a report from global recruitment firm Robert Walters, one-third of all jobs advertised at UK banks are tech-related, with such roles increasing by 46% over the last three years.
For example, Santander is adding 3,000 people to its global IT team as part of its €20bn, four-year, digital and technology transformation.
In the UK, traditional job roles in banks have declined by 42% (about 100,000 jobs) in the past three years, while tech jobs have increased, said the Robert Walters report.
Bannister said the banking sector will “of course” continue to recruit from the IT supplies sector, but it is also actively recruiting from the aerospace and defence industries to help it counter cyber-security challenges and financial crime.
But as competition for the right skills from the likes of Google continues to increase, banks might not be able to rely on offering high salaries to attract the best. Lodge said: “It isn’t just about salary, but also about culture, career path and, frankly, that fintechs are perceived as being sexier.”