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Tackling the IT Talent Shortage in the Banking Industry
The evolving demand for fast and convenient financial services from younger generations has thrust innovative technology into the heart of banking operations. Consequently, the requirement for highly skilled IT professionals has never been more critical.
However, the banking sector is grappling with a persistent challenge – the IT talent shortage. While the industry is experiencing an unprecedented wave of digital transformation, the supply of qualified IT talent seems unable to keep pace with the surging demand. This shortage poses significant obstacles to banks striving to remain competitive, secure, and customer-centric in an era defined by technological revolution.
In this research, we will discover the multifaceted aspects of the IT talent shortage within the banking industry, including the root causes and strategies that banks should adopt to bridge this crucial skills gap.
Statistics Related to The Tech Worker Shortage
- A recent study conducted by the Australian Computer Society (ACS) indicates that the country will need an extra 60,000 experienced ICT professionals annually, with software developers being in the highest demand.
- Tech vacancy rates are 60% higher than the national average, and there is a notable deficit in talent, particularly in roles requiring specific knowledge and experience in emerging technologies (Commonwealth Bank, 2022).
- Although Australia's tech workforce has increased 8 percent in the past 12 months, as per The Minister of Industry and Science report, tech skills shortages are gripping the nation, with Database Experts, ICT Security Specialists, and Systems Analysts remaining in the top 20 occupations in need.
Difficulties in Finding IT Talents for Banks
Failure to tackle these skills gaps may impede the banking institutions' digital transformation process. Why it’s challenging for banks and financial institutions to find and retain a qualified IT workforce? Here are some possible reasons that we’ve identified:
1. Intense Demand for IT Specialists in the Cutting-Edges Field
As banks have increasingly adopted cutting-edge technologies such as artificial intelligence (AI), open banking APIs, advanced data analytics, and cloud computing, the need for specialized IT expertise has reached a critical juncture. The research from CommBank also indicates the demand for cybersecurity talent is expected to remain high in the foreseeable future without any signs of decrease, leading to the shortage of experts available to fill high-paying cybersecurity positions.
This poses a growing gap between educational offerings and the skills needed in the job market. While universities aim to provide a well-rounded education, businesses often demand particular technical skills that may not be adequately covered in traditional programs. It also often takes a significant amount of time to update the institution’s curricula to reflect the latest industry trends and technologies. Notably, not every institution, particularly smaller ones, possesses the capability to provide programs in these areas.
2. Inadequate Salaries and Benefits
Once hired, retention is difficult. Even when banks find the right IT professionals, retaining them can be equally challenging.
Virtually every business requires IT talent, giving candidates a wide array of choices primarily driven by lucrative salaries, company benefits, career growth, skill development potential, and other captivating factors. According to the Hays guide, insufficient salary is one of the critical reasons for the increasing job-seeking behavior of 76% of technology experts.
Incumbent banks tend to allocate more attention and resources to their financial advisory experts compared to their technical workforce. As a consequence, the most sought-after tech professionals tend to job-hop if they perceive their skills are underutilized adequately or that they are not being offered competitive compensation and benefits.
3. Quick Expansion of Digital Offerings
As consumers are becoming increasingly digital in the way they bank and demand more innovative and personalized solutions, the BFSI businesses are in the race to fulfill these evolving requirements. Hence, they need to concentrate on continuously enhancing mobile banking apps and creating extended financial services.
For instance, one of the “big four Australian banks” expands its core banking services into a donation platform for the community. However, to successfully develop such a comprehensive platform from scratch, the bank needed to scale up a skillful and experienced team to manage the entire software development cycle and stay up-to-date on the latest technology.
When attempting to form a dedicated software development team in a limited timeframe, the scarcity of available tech talents in Australia prohibits the banking institution from having a proficient software team as per their schedule and budget.
To know how the bank can address this challenge, read the full case study here: How an Australian Bank Has Scaled Up Digital Team by 6 Times with KMS' Talents.
The Impact of the Tech Worker Shortage on the Banking Industry
The IT professionals shortage has far-reaching consequences for the banking industry. Firstly, it hampers the industry's ability to innovate and stay competitive. Banks need skilled tech workers to develop and implement cutting-edge solutions that enhance digital customer experiences, optimize processes, and mitigate risks. Without a sufficient number of tech professionals, banks risk falling behind their competitors and failing to meet the evolving needs of their customers.
Additionally, the more banks depend on digital platforms and technologies, the more the demand for robust cybersecurity measures. However, with a shortage of cybersecurity experts and IT professionals, banks may struggle to protect sensitive customer data adequately and fend off cyber threats. This poses a significant risk to the industry's reputation and the trust customers place in banks to safeguard their financial information.
Strategies for Bridging the Tech Talent Gap
There are no immediate solutions to this persistent challenge. Addressing the tech talent shortage requires a multi-faceted approach. Below are some tactics that banks can implement to narrow the gap:
1. Increase Employee Benefits
To attract top IT professionals, the BFSI businesses can consider offer compensation and benefits that are competitive with numerous large companies, not only within the banking sector but also across other industries.
Beyond the base pay, you should provide opportunities for annual bonuses, profit sharing, and performance-based incentives. If your software development team successfully deploys a new system within the scheduled timeframe and budget, offering team bonuses can be highly appreciated.
Besides offering financial wellness benefits such as stock options, home loan incentive programs, and competitive PTO policies, banks should also consider providing career growth and work flexibility.
2. Focus on Skills Development and Growth Opportunities
The recent survey from McKinsey indicates that skill-building was cited as the second-most common tactic for addressing skill gaps. This encompasses training courses, conferences, and ongoing education for financial services-specific certificates such as Payment Card Industry Data Security Standard (PCI DSS) and Certified Banking Domain Professional (CBDP).
By concentrating on developing internal talents, banks guarantee access to the most up-to-date skills and expertise. In parallel with that, businesses that constantly invest in ongoing education for IT staff will be perceived as much more attractive places to work.
Merely attracting prospective tech talent is not enough; the more critical aspect is retaining them within your organization. Since developers and software engineers demand a long-lasting future with your company, providing clear growth opportunities and career progression is worth considering.
3. Consider IT Offshoring
While the two strategies mentioned above can be time and resource-consuming to implement, banks and financial institutions can consider a more effortless yet effective approach. By offshoring IT projects, banks can take off the pressure of investing in both talent recruitment and retention strategies. Moreover, there are tons of benefits from IT offshoring that you can consider, including cost-effectiveness, direct access to a global talent pool, improved productivity, and high scalability and flexibility.
There are some prominent destinations for offshoring, such as Vietnam, the Philippines, India, etc., in which businesses can have highly skilled IT specialists and robust technology hubs that are devoted to their specific obstacles and goals. Additionally, according to a 2022 Global Software Outsourcing Trends and Rates Guide, the cost of offshore outsourcing services in Vietnam is 30-60% lower than that of Australian services and is much more affordable than the costs from other ASEAN countries.
The IT offshoring partner also provides a broad spectrum of services, including banking app modernization, software development, digital testing, data analysis, and business process optimization.
IT Offshoring: The Future of Banks Looking for Instant Talent Ramp-Up
The competition for skilled IT professionals is fierce. By understanding the reasons behind the shortage and implementing the right strategies to address it, the banking industry can bridge the gap and ensure a robust and skilled tech workforce.
Within the fast-paced digital transformation, banks have limited time to recruit and train tech talents who can effectively adapt to emerging technologies and industry trends. Thus, banks need to explore alternative strategies, and IT offshoring emerges as a strategic solution to address this pressing need for instant talent ramp-up.
Understanding the pressing demand for skilled IT specialists of banks, KMS Solutions, with over 1,600 IT professionals, is the essential tech resource to support their strategic technology initiatives. KMSS also possesses robust IT expertise in cutting-edge technology and deep domain knowledge within the BFSI sector to help banks and financial institutions revolutionize their businesses.
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