Before the Covid-19 crisis, banks were facing fundamental challenges to their business models from fintechs, big techs and from customers themselves. Despite current circumstances those challenges remain, along with a skills gap in the industry.

Our recent white paper, The 2020s banker,takes a deeper look at the issues facing financial services. It examines the priorities for banks and sets out why developing skills among staff will be critical to the finance industry’s future success.

So what did we find? Financial regulators, in order to encourage the provision of better and cheaper services to consumers, have made it easier to bring new fintech services to market. They have also made it possible for consumers to share their personal banking data with service providers outside their bank, opening it up to non-banking organisations. That means that – despite the barrier to entry that heavy regulation represents – many of the services that banks offer can be commoditised and offered by new players.

So the traditional structure of the industry – with extensive branch networks and cash handling – is changing. Announcements on branch closures and job losses are a regular occurrence in the traditional banking sector.

Consumers now expect all financial service providers to offer sleek and secure smartphone apps and digital services that support their day-to-day needs. Those needs include hygiene factors, such as balance information, payments, money transfers, along with the ability to change overdraft or card limits, automate saving and freeze bank cards. As Barclays puts it: over 50 of the most common banking tasks can be done via mobile and online banking.

Computers versus people power

What computers do is to crunch a lot of numbers very quickly. They carry out routine operations for which explicit rules can be defined. It was long believed that they would never be able to carry out “non-routine” tasks like driving a car or deciphering handwriting, leaving those, together with complex communications and problem-solving tasks, for people. But we all know that is changing.

Still, full automation and integrated AI is some way off and humans still beat computers for technical expertise, balancing risks and providing comprehensive and complex advice.

And while automation enables companies to provide simple, mass market, services, at a lower cost, as things stand, automation can actually increase the need for human support staff. Using humans for very complex, or small-scale tasks, rather than programming high-powered computers is often still cheaper.

And computers cannot empathise or understand social and emotional context. There may be fewer roles in banking, but those roles are more diverse and need a broader range of skills. And that’s increasingly being recognised by government and regulators, as well as the industry itself.

Skills and talent shortages

The Financial Services Skills Taskforce highlights critical focus areas to tackle the skills shortage and talent crisis, including the technical upskilling and retraining of staff, strengthening the sector’s purpose and culture, attracting, motivating and retaining the widest and deepest pool of talent, and addressing poor diversity within senior leadership.

The Taskforce argues that having more people with the relevant capabilities will benefit firms through reduced recruitment and employment costs, increased productivity and accelerated training and development, and improved deployment of the existing workforce.

And the finance industry is starting to recognise that. While the challenges of Covid have been focusing minds, in particular on business models and cutting costs and headcount, there’s also an increasing recognition that those who are left need to be more knowledgeable and have a far wider range of skills.

Those skills include understanding risk management, sustainability, and governance and ethics, as well as being highly capable in digital banking and in managing customer relationships via remote channels. Well trained professionals are well-placed to help consumers manage increasingly complex financial needs, but also, in this digital age, to avoid scams and costly mistakes.

Not only that, companies know all too well that there may be hefty liabilities to face if they do not actively manage mis selling risks, so staff play a vital role in minimising fines and compensation payments.

So staff who are well qualified are better placed to avoid bear traps but also to:

• identify opportunities
• adapt quickly to a fast-changing environment and
• really focus on developing the services customers want, delivered in the way they want them.

People power is still very much required in banking – and a refocusing of business models to segment their products and services is a potential way forward for an industry that has been struggling to make their current business models add up.

Productivity will be paramount in the months ahead. Banks will have to do much more with fewer resources as the global economy gets back on its feet. They’ll also need staff who can build strong relationships with customers over digital channels.

Banks need staff who can quickly move to a digital environment and keep up with fast-moving regulatory and economic demands. But banks are telling us that they need help to develop these skills among their existing staff.

How education bodies can help

So if there is a growing consensus that well qualified staff are an essential element of ensuring success now and for the future, and a continuous learning mindset will be essential, how can education bodies help?

The original banking qualifications established by our founding body (Institute of Bankers) which led to ACIB – Associate of The Chartered Institute of Bankers – were the ‘gold standard’ in the sector. Over the last 140 years – since we were first founded – of course our qualifications have evolved to focus on the core skills required by bankers in changing times, and to reflect the different ways people study and learn.

We’ve recently revised and updated our banking qualifications to provide a flexible route to upskilling staff and providing them with the knowledge, skills and professionalism to be effective now and for the future. From foundation to advanced level, we’ve designed our qualifications so that students can study while working fulltime. And our new Certificate for Retail and Digital Banking is sharply focused on the skills people working in the sector need for today, and tomorrow.

So is now the time for the sector to start to focus on filling the skills gap?