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  5. The Great Resignation: Is there a Risk to Corporate Banking Innovation?

The Great Resignation: Is there a Risk to Corporate Banking Innovation?

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22 July 2022
Colin Kerr

The current economic outlook will undoubtably bring some challenges in the labor market. Stock indices have been in retreat since January (notably bank stocks), and inflation remains elevated. There is a technical debate as to whether the US is in a recession, although the unemployment rates remain remarkably low.

  • United Kingdom unemployment rate – 3.8% (Office of National Statistics, April 2022)
  • United States unemployment rate - 3.6% (US Bureau of Labor Statistics, June 2022)

Despite the softening in the economy, and some recent news of layoffs, the demand for technology talent appears to remain strong. My LinkedIn feed is filled with banking technology connections starting new positions, so the ‘Great Resignation’ seems to continue. This has created a resourcing challenge for banks as they work through high priority technology programs.

Celent analysis of recent corporate banking technology priorities puts cloud, identity management, and AI/ML at the top. IT Strategy and Priorities in Corporate Banking, 2022: Accelerating Away from the Pandemic (June 2022).

‘Which of the following are your leading investment priorities in 2022 from a technology perspective?’

Source: Celent Banking IT Strategy Survey 2021/22

Banks have a full portfolio of important corporate banking priorities. For example, modernizing customer lifecycle management, the development of ‘intelligent treasury’ solutions such as cash forecasting, or the implementation of virtual account management. Many of these initiatives require significant investment in leading edge technologies and accompanying skilled resources, as reflected in the chart. However, banks are in a talent war to increase the number of highly skilled engineers needed for developing on cloud and AI platforms, while simultaneously trying to stem attrition. Banks increasingly face a tough question. Beyond adding temporary consultants, who is going to lead and build these new initiatives, and how can the workforce be upskilled?

One path is to develop more advanced technology training to provide existing resources with new skills and the chance to grow technology careers internally. The Financial Times recently reported on the efforts at M&T Bank in Buffalo NY. Banks take DIY route by taking tech education in-house | Financial Times (ft.com). Ensuring that people are given a chance to succeed and the space to learn and practice these new skills is important. Ideally the training is coupled with some parallel project work experience, but that isn’t easy to achieve when the trainee is in a fulltime role. As banks step into major technology transformations, seasoned technology and leadership experience in these new platforms is also essential, and that likely requires finding new external talent.

Firms in traditional financial services industry locations have always competed with each other for talent. New York and London are the obvious examples, but in cities like Charlotte NC, Bank of America, Wells Fargo and Truist all compete in the local labor market. Certainly, there are many in the financial services industry who have spent careers moving between a few banks. One legacy of the pandemic and the shift toward more flexible working options means that the labor pool for banking technology has become significantly more varied and competitive. Banks now also compete in their local markets with Silicon Valley and fintechs who are hiring for remote roles. The same is true for fintechs and financial technology vendors. For example, Atlanta is a major center for banking technology vendors, but those companies must now also compete with Big Tech as Google and Microsoft expand their Atlanta campuses, albeit perhaps at a slower pace.

To win the war for engineering talent, banks need to be committed to initiatives and technologies that are attractive to top talent. Two areas in particular stand out; public cloud and advanced analytics. Engineers want to use the newest platforms and tools available; but that has not always been possible in the transaction banking technology space, thanks to the slow rate of technology change until recent years. The good news is, as Celent research shows, investment in corporate banking technology is transitioning to the most modern and in-demand cloud and data platforms, which should help attract talent. Conversely, banks that delay investing in public cloud, identity, and advanced analytics technologies will have trouble recruiting the top engineers and risk slipping behind on the innovation curve.