Culture in financial services: solving the conundrum

The Financial Services sector is undergoing rapid digitisation, catalysed by new technologies, Open Banking regulations, and increased competition from fintechs and neo-banks. But transforming a business takes more than technology—to thrive in the coming decades, banks and financial firms need to change their culture too.

Younger generations now expect faster, simpler, and more accessible lending and banking services. And with nimble fintechs and challenger banks growing their market share via innovative services, legacy institutions must invest in the right personnel and structures to support the cultural change required to compete.

Change starts at the top

It’s often said that “a team is a reflection of its leader”, and this is never truer than during a company-wide transformation. That’s why a reinvention of business culture requires all C-suite executives like the CEO and CTO to be onboard.

To keep pace with the changing face of financial services, firms must adopt modern organisational models. For example, decentralised decision-making processes[GB1] result in teams working together in new ways, identifying opportunities and challenges, and creating new solutions. This can be a tough ask, as leaders of legacy banks must contend with organisational siloes and ingrained attitudes.

As a result, financial firms are increasingly recruiting from outside of the industry to bring new perspectives into their management. Goldman Sachs hired its Co-Chief Information Officer and Chief Technology Officer from Amazon Web Services and Verizon respectively. Deutsche Bank’s Head of Technology, Data and Innovation joined from software company SAP. And JP Morgan’s new Head of Technology arrived after two years at Lyft, and over a decade with Google.

Few of these hires had any previous financial services experience. But what they bring is cultural knowledge and insights from modern, successful tech businesses—the very type that legacy banks are looking to emulate. With the right leaders, big banking firms can break down organisational siloes and introduce agile structures that emphasise flexibility and innovation, while leveraging fresh ideas to keep up with digital challengers.

A flexible workforce

The COVID-19 pandemic showed us that employees can successfully work from anywhere, transforming finance’s day-to-day operations, perhaps forever.

Accenture’s 2021 survey of UK financial services staff found that 69% of respondents now want to spend a maximum of two days a week in the office, while only 8% want a full-time return. Meanwhile, research from Culture Shift shows almost half of Britain’s financial services workers think home-working has a visibly positive impact on their workplace culture, bringing a better work-life balance, fewer incidents of bullying or harassment, a stronger focus on wellbeing and trust, and more.

Some legacy banks such as Goldman Sachs have claimed that remote working is an “aberration” and aim to bring staff back into the office permanently when safe to do so. However, a UK survey from jobsite Randstad shows that flexibility is now the third most important factor when choosing a new job for financial services employees. So, while home-working policies are for business leaders to decide upon, the numbers suggest that those who oppose them will find recruitment and talent retention tougher.

If larger banks are hesitant to recruit remote workers in their home countries due to worries over factors such as productivity and cost, an alternative, affordable approach can be applied through ‘nearshoring’, by which firms recruit talent from nearby regions instead. Reduced labour costs and favourable tax incentives combine with larger talent pools, localised client knowledge, and similar time zones to offer banks flexible, results-oriented support.

Incorporating lessons from other innovators

Although large banking organisations often boast a rich history of success, clinging to their legacy infrastructure and culture can stifle development and stall the changes necessary to compete in the modern industry. So, as within any sector, financial services businesses must keep their ears to the ground, listening out for the latest innovations and practices that they can implement within their own organisations.

90% of UK customers say that tech features are a key factor when choosing their bank. To compete with challengers like German giant N26 and UK-headquartered Monzo and Revolut, many incumbents are investing in improvements to their digital platforms and developing new services and features. And an advantage that major legacy banks have over challengers is the ability to establish venture capital unitsand innovation labs, allowing them to incubate original ideas from smaller, more agile startups, or even acquire them outright.

Banks have also launched offshoot operations under new brands that aren’t held back by legacy issues, though without the benefit of the brand recognition and trust the bank has earned over many years. While RBS tried and ultimately failed to make inroads with new digital bank Bo, this hasn’t stopped giants like JP Morgan Chase from unveiling similar UK offerings, featuring modern, challenger-inspired services like daily rewards, 24/7 online support, automatic savings round-ups, and more.

Creating a culture set for success

Technologies such as machine learning and data analytics can improve financial services, but ultimately humans are still pulling the strings. And without the right people to make the right decisions, digital growth and development within legacy banks will stumble. Financial firms must undertake a cultural shift that lays the foundations for collaboration, innovation, and growth, while leveraging their resources and expertise to deliver best-in-class services.

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