Fintech: banking graveyard
Image: Stuart Monk/Shutterstock

Will fintech be the death of legacy banking jobs?

28 Nov 2016

As part of Fintech 2017, we’re taking a look at fintech careers. Here, Hays’ Philip Charsley discusses whether fintech is a threat to traditional banking jobs.

Despite an abundance of doom and gloom reports about fintech’s potential to decimate jobs in the financial services sector, the rapid development of new technology companies will not destroy the traditional field. In contrast, fintech will actually create jobs, making careers in the sector an increasingly attractive prospect.

Banks face an increase in competitive threats on all fronts, as new technology companies and challenger banks poach customers and market share, noted McKinsey & Company in its global banking annual review 2015.

Banks could lose up to 60pc of their retail profits to fintech firms, the consultancy said in the report. “The changes to come over the next 10 years will be less visible than the global financial crisis or the bursting of the dot-com bubble – and yet their impact on banking’s economics and even fundamental business models will be much more substantial,” McKinsey claimed.

Meanwhile, Accenture believes that by 2020, more than one-third of traditional retail banking revenue could be at risk from new competitors and new trends.

‘Banks could lose up to 60pc of their retail profits to fintech firms’

There is no denying that fintech – an umbrella term used to describe start-ups operating in the financial technology sector – is booming. Accenture says that, in 2014, global investment in fintech ventures tripled, to $12.21bn.

However, as the consultancy firm points out, although the digital revolution in financial services is underway, the impact on existing players is still unclear.

“Digital disruption has the potential to shrink the role and relevance of today’s banks, and simultaneously help them create better, faster, cheaper services that make them an even more essential part of everyday life for institutions and individuals,” said Accenture.

Greater career prospects in banking

Fintech, coupled with rapid automation of the sector, could lead to job losses, but mostly in back office positions where technology will create more efficient operations and processes. Positions requiring innovation and technological expertise, or particular skill sets – such as asset management or investment banking – have bright days ahead.

For candidates, financial firms that are more established can offer better career opportunities than start-ups.

“Fintech start-ups are part of a very competitive sector with a huge amount of risk involved. Despite its exciting appeal, for candidates seeking employment in the sector, job security and career progression will have to be secondary considerations,” according to our Finance Technology team.

‘Fintech start-ups have a failure rate twice as high as normal start-ups’

Joining a fintech company does not necessarily translate to a long-lasting career within the same company. The failure rate of start-ups is notoriously high. In the financial technology sector, it is even worse.

The founder and CEO of social trading platform TrakInvest, Bobby Bhatia, once stated that fintech start-ups actually have a failure rate twice as high as normal start-ups.

Meanwhile, M&A activity is rife in the sector. According to a report into M&A activity – published by independent investment bank Berkery Noyes – there were 192 fintech mergers and acquisitions, worth $18.9bn, made in the first half of 2015.

Many banks themselves buy fintech companies; British banking giant Barclays bought payment and loyalty specialist Logic in 2015, while France’s Crédit Mutuel Arkéa bought payment specialist Mangopay.

Fintech acquisitions are one way for banks to adapt to the demands of the digital economy.

“Banks have started to recognise the benefits of the more agile nature of smaller businesses. They are not as rigid as they were – there is now a different way of doing things within financial organisations. They know that they need to emulate what financial tech firms are doing,” according to Hays Finance Technology.

According to this department, banks and financial firms are trying to be more flexible when they recruit, and have started to adopt the innovation techniques of tech start-ups. Aviva, for instance, has a ‘digital garage’, while Direct Line Insurance has a ‘digital floor’.

Meanwhile, some of the world’s largest banks, including UBS, JP Morgan and Barclays, have joined an initiative to set up private blockchains to allow digital financial transactions within a safe network, and are increasingly involved in cryptocurrencies.

The candidates hesitating between a career in fintech or in traditional financial services therefore shouldn’t lose any sleep over it: soon, every bank will be a fintech company.

By Philip Charsley

Philip Charsley is the director of financial markets recruitment at Hays, working with top-tier investment banks, boutique corporate finance houses, stockbrokers, and private equity and venture capital firms.

A version of this article originally appeared on Hays’ Viewpoint blog.

Looking for jobs in tech or science? Check out our Employer Profiles for information on companies hiring right now and sign up for our Career Republic e-zine for a weekly digest of sci-tech careers news and advice.

Loading now, one moment please! Loading