It’s not news that Fintech is booming. On the one hand, millions of Fintech start-ups appear every year to offer innovative services, channels, and approaches. On the other hand, existing financial institutions and companies are improving the technology side of their business and expanding market reach.
As a result, the request for IT talents in Fintech is increasing exponentially. However, the labor market cannot keep pace with the demand, and Fintech is experiencing a growing shortage of software engineers. According to the Harvey Nash / KPMG CIO Survey, in 2019 the shortage of data scientists, enterprise architects, cybersecurity experts, and other technology talents has reached an all-time high since 2008.
Let’s delve deeper into the issue, analyze its impact on the Fintech business, and determine how it can be resolved.
In its economic outlook, Deloitte claims that because the US is now close to full employment and slow workforce growth, it will eventually cause lower economic growth. The same concern can affect any particular area: an industry can hardly develop if it doesn’t have enough workers to ensure growth.
The Fintech Talent Shortage: Risk of Inaction in 2020 report states that Fintech may need more than 200,000 software engineers in 2020. The number is not so enormous as to raise doubts that all the positions will be filled. Moreover, the US Department of Labor says that in 2018 almost five million people were employed in computer and information technology occupations. So let’s breathe a sigh of relief that the IT talent shortage will not touch Fintech.
Oh no! It will.
In today’s technology-based world, it’s not easy to find an industry where IT experts are not required. Apart from Fintech, HealthTech, EdTech, AgriTech, and other technology areas, software engineers are also needed in manufacturing, transportation, mining, entertainment, etc. Wherever you look, you’ll find technologies controlled by software and the need for IT talents.
The abovementioned report says that only 0.6 percent of open software engineering jobs are for Fintech. Does this mean a similar rate of IT talents will enter Fintech? Not so much.
The inability to quickly hire a seasoned software engineer affects the Fintech business in several ways.
The long hiring process is costly. As a result, we don’t allocate our resources to innovation and growth and miss opportunities. If the IT team is understaffed, the company can’t make satisfactory progress in expanding functionality or solving problems that affect customers’ loyalty. We get outcompeted by those who have found ways to build a strong software engineering team.
Bad hiring puts our Fintech business at risk. If we are extremely lucky, we can quickly hire an IT expert with the required skills and expertise. But, typically, hiring fast means compromising our needs and taking on anyone who is more or less suitable for the job. Generally, this is better than nothing, but not always.
News of security breaches and fines charged by regulators due to technical issues are reported now and again. Software developers with limited expertise in Fintech create insecure or noncompliant systems, which leads to penalties and sanctions imposed by SEC, FINRA, etc.
Besides poor development quality, a bad hire may fail to fit into the corporate culture, negatively affect team morale, and cause personality conflicts. According to the Fintech Talent Shortage report, failure to create the right team leads 23 percent of start-ups to shut down.
Slow speed to market decreases the profit. Customer expectations are evolving all the time. The more innovation we offer our customers, the more novelty and improvements they expect from us going forward. If we are unable to create a winning team quickly, we will either miss IT talents or suffer from poor performers. In both cases, we fail to rapidly launch new features, integrations, or updates. If we aren’t first on the market, faster competitors can capture some of our expected new clients. In the worst-case scenario, even our existing customers may switch to our competitors. As a result, our profit doesn’t increase as we estimated or even falls due to lost customers.
The scarcity of engineering talents in the US forces Fintech companies to look for them abroad. Businesses try different options:
Each option has its pros and cons. Let’s look at them in a nutshell.
Freelancers are cheaper than any other option. However, they usually work singly, and we should consider the human factor. For example, a freelancer can become ill and be unable to complete the work, or he/she may decide to leave our project because it’s not as interesting as another one offered. Freelancers are best suited to short-term projects.
Outsourced teams, especially dedicated teams, are better suited for long-term projects. When building the software development team, we can influence which experts to assign to the project. If we establish the development process and communication right, the team will be engaged and won’t need excessive supervision. Working with the team, we may be sure that the work will be done even if some members are ill or on vacation.
An office in another country is the most complex and resource-intensive option. We need to consider payroll, taxation, HR, security, and other legal issues. In contrast, we will have full control over the remote team.
Whatever option we choose, the need to build a distributed team requires additional knowledge and effort. The Fintech Talent Shortage report says that using a remote workforce improves performance in most cases (53 percent). However, only 8 percent of those who build distributed teams get the most out of them because of well-established processes and communication.
Well, if you can’t establish processes within a team, it doesn’t matter whether you work with a freelancer, outsourced team, or your own remote team. In any case, you will hardly succeed.
The shortage of IT talents in the US really exists. And it will undoubtedly not be resolved in the future. If we want to enable our business growth, we will have to consider an alternative workforce from abroad.