A 2016 study by KPMG and H2 Ventures revealed London hosts 17 of the top 50 international fintech firms. $564 million of funding was invested in British fintech start-ups in the first few months of 2017 alone. Despite the Capital’s impressive position, much of the talent employed by fintech companies still comes from outside of the UK. With Brexit looming, the London tech scene is expecting a mass exodus of its talent that will significantly widen the skills gap and make it hard for fintech innovation to sustain in the UK.
Demand and supply
A decade ago people were still stashing money around their house for “safe keeping” and it was rare for someone to use mobile and online banking. Ten years on and technology is transforming finance at a pace many organisations are struggling to keep up with – but must catch up to. With companies like Amazon providing customers with a frictionless retail experience, and Airbnb doing the same for tourism, consumers demand seamless services in every part of their lives. Banks included.
JPMorgan Chase is one of many world-leading financial firms toallocate a significant proportion of its IT budget to digital transformation. For its 47 million customers – responsible for $5 trillion of daily payments – the firm is constructing software platforms that cut across the company's retail, wholesale and investment banking businesses. The strategy, including APIs and microservices, will produce virtual assistants and introduce Artificial Intelligence (AI) to improve customer service.
With banks and financial services firms across the UK kickstarting similar large-scale digital transformation projects, there is one clear problem. There just aren’t enough employees with the right tech skills to get the job done.
The Brexit effect
A recent Sparta Global survey of leading technology professionals - representing the technology, finance, media, retail, public sector, charity and legal industries – found organisations across the board are suffering from skills gaps: graduate level (38%), mid-level (55%) and management level (38).
Software development was identified by 52% of respondents as a missing skill, making it the most sought-after area of expertise. 40% recognised a gap in test automation skills, DevOps (38%), BA/PMO (19%) and manual testing (16%).
According to research by Innovate Finance, the fintech sector now employs more than 76,500 people across the UK. By 2030 - a number projected to increase to more than 100,000 by 2030. With a recent Raconteur report confirming 42% of fintech workers are drawn from outside the UK, the sector is highly exposed to changes in the immigration settlement post-Brexit.
The inability to import qualified workers from outside of the UK - to bridge the country’s own skills gap - will pose a danger to the UK’s future as a competitive place to set up a fintech business or base a European hub.
Almost half of the survey respondents claim Brexit has already reduced access to talent from outside the UK, while one in four contractors with a non-UK passport admitted the threat of more immigration restrictions had influenced their decision to leave Britain.
Many fintech businesses rely on fast developing technologies to maintain competitive advantage. For companies to move quickly, they need to have access to the right talent in the right geographies.
A ready-made solution
It is too early to draw definitive conclusions on the impact of Brexit, but companies are already assessing the implications of fundraising, talent acquisition and talent retention. Only urgent action from industry, teaching establishments and the Government can prevent the skills crisis from damaging the UK’s productivity and economic competitiveness.
Disruptive and “cool”, companies in the fintech sector should not find issues when hiring young talent, but awareness of the industry remains low. Universities and industry leaders need to work together to nurture a better understanding of new-breed finance companies and the opportunities associated with working in fintech. Investing in young talent provides an opportunity for companies to mould teams to fit their established company culture and introduce fresh perspectives on problems and ideas.
This is where training academies – a stepping stone between higher education and work – can prove to be another interesting solution. Putting graduates through relevant, work-related training programmes could be a credible addition to a university education and the gateway to a skilled UK workforce. Specialist training academies can upskill young people through specific job-related training and prepare them to hit-the-ground running. Hiring young people from training academies that offer these services means an organisation is hiring an individual they know has the knowledge to succeed.
Finding, training and retraining talent could be the only means of safeguarding the UK fintech industry post-Brexit. It is time for the UK fintech industry – and its companies - to stretch themselves, change and evolve, spending the time today to shape the future leaders of tomorrow.
David Rai is the CEO of Sparta Global, a leading provider of business and technology consulting services