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Banks and fintechs are duelling in a ‘war for talent’
Europe’s financial technology startups are expanding, and hiring software engineering talent is imperative to their success.
Payments company GoCardless Ltd., which employs 170 people in London, will open a Paris office in February, said Chief Product and Technology officer Carlos Gonzalez-Cadenas. Online lender LendInvest Ltd. said it will make a “concerted effort” to hire additional engineers in London this year, while Salesforce.com Inc.-backed software company Anaplan Inc. says hiring engineering talent is its current priority.
“Last year, we went from five to over 40 people on our engineering team in London,” said Frank Calderoni, Chief Executive Officer of Anaplan. “Many of our employees have experience with tier-one banks, including Morgan Stanley, JP Morgan, Deutsche Bank, UBS and Goldman Sachs.”
Europe’s fintech industry, which includes challenger banks and online-only lenders, has rapidly expanded over the past 10 years. Traditional financial institutions have faced intense competition as a result, with former Barclays Plc CEO Antony Jenkins saying in July last year that banks could face obsolescence in five to 15 years.
“We often say internally that it's a war for talent,” says Christian Faes, Co-founder and CEO of LendInvest, which employs about 130 people.
Perhaps unsurprisingly, much of the hiring by fintechs is from their larger rivals. Faes said about 30 to 40% of its hires come from major financial institutions, adding that 100% of the team’s small risk and compliance team came from banks. For MarketInvoice Ltd., another British online lender, about three-quarters of its 85 employees — roughly a third of which are software engineers and data scientists — came from a large corporate in the financial services or accountancy space, said CEO and Co-founder Anil Stocker.
While banks have traditionally been high-payers, the competition is increasing.
According to Glassdoor’s averages for London-based employees, a software engineer at online lender Funding Circle could expect a base salary of about £51,000 ($71,000) – the same figure as a similar role at Goldman Sachs Group Inc. Engineers at UBS Group AG in London earn an average of £59,000 based on Glassdoor data, slightly lower than the average of £64,000 possible at Monzo Bank, a challenger bank.
Stocker said many employees who've been working at big institutions experienced some frustration. He said rolling out projects in the banks has been quite painful as it takes too much time, compounded by the need to deflect the headwinds associated with regulatory burdens, as well as legacy systems and old-fashioned software and code that requires a lot of time to modernise.
It’s not all one-way traffic. Despite the allure of fintechs, many banks are still proving to be attractive places to work. Data compiled for Bloomberg by jobs marketplace Indeed showed that between the second half of 2015 and the second half of 2017, Barclays and HSBC saw an increased interest of 21% and 77%, respectively, in their job postings from those with software engineering backgrounds.
Goldman Sachs hasn’t been blind to this. Last year it reviewed the attractiveness of its business to programmers, which resulted in an increase in pay to counter the draw of startups. It also hired Andrew Trout recruitment specialist who spent about two years at payments compny Square Inc., to make sure the investment bank appealed to college graduates and programmers outside of financial institutions.
But banks are also not giving off the most alluring of signals for entry-level technologists. In September 2017, Vikram Pandit, who ran Citigroup Inc. during the financial crisis, said technology could replace some 30% of banking jobs in five years. In October 2017, the CEO of Nordea, the Scandinavian bank that is cutting 6,000 jobs, said the financial industry may have half as many workers a decade from now as it adjusts to a digital revolution.
For the CEOs of fintech startups, striking the right balance is key. A fintech full of ex-bankers doesn’t help a startup act differently to the incumbents it’s trying to dethrone. LendInvest’s Faes said it's useful to have those people because they can explain how the larger competitors work internally. “But at the same time we want to be challenging them to think about how they did it, and how can we do it better,” he said.