The banking sector is currently facing serious staff shortages – and this will likely continue long after the COVID-19 pandemic ends. According to a US labor market report, although unemployment dropped from 4.2% in November 2021 to 3.9% in December 2021, there were only 199,000 new jobs created. That’s half short of the 400,000 new hires expected by forecasters.
This is a desperate struggle for the banking and finance sector. The scarcity of banking professionals has pressed several banks to consider hiring ex-offenders to meet the demand. However, the prevailing workforce crisis gives fintech solution providers a massive opportunity to innovate and fill a demand for a new generation of banking services and technology, particularly for small and mid-sized banks.
“Fintech providers are stepping into the breach, providing struggling lower-middle-market investment banks with technology solutions that can solve their short-staffing issues,” Fed wrote.
Beyond addressing staff shortages, utilizing technology to automate tasks and support their personnel element help businesses attract and retain talent. That’s why traditional banks that use legacy systems and outdated business models are having problems with recruitment and retention.
“In an internal Goldman Sachs survey, first-year analysts with the bank shockingly characterized work conditions ‘inhumane’, with 100-hour workweeks, sleep deprivation and abuse from senior colleagues,” Fed wrote. “It is no surprise that bankers are turning to fintech for the same reasons consumers do — both are fed up with how legacy banking systems operate.”
Banks will have to partner up with the right fintech vendors to navigate the current workforce crisis. That said, Fed articulated that such partnerships will remain a permanent fixture in the banking industry even as shortages in workers are addressed.
“The move to decentralized services is not just a stopgap solution that will cycle out once labor shortages are resolved; this is a growing part of a new normal that will characterize our post-pandemic world.”
Another reason the labor shortage in the banking sector will persist is that many bankers, especially millennials, will want to carve out their own career paths.
“Call it a generational shift, but millennials want to be their own bosses,” Fed wrote in American Banker Magazine. “This is especially easy to do in a career like investment banking. With years of experience under their belts, millennial investment bankers are coming of age in their careers.”
And there is truth in this projection. The US investment banking market is expected to grow from $138B in 2021 to $140B in 2022.
Fintech vendors will have a big role to play in this scenario. As a new breed of investment bankers enter the fray, they expect technology to help them achieve stability, automate their performance, and accelerate their growth. Technology is crucial as small and mid-sized investment firms don’t have the resources of established investment banks like Goldman Sachs and JPMorgan Chase.
“Why shouldn’t small and midmarket banks have access to the same level of fintech seamlessness that are now in-house at the banking behemoths?” Fed asked.
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