The transformation of the financial sector is accelerating, observed Luxembourg for Finance (LFF), the Luxembourg financial centre’s development agency, in a study published on 20 October in partnership with McKinsey. Whereas until recently financial services were governed by 20-year life cycles, they are now tending to shorten to cycles of between 18 and 36 months. Driven largely by innovation and technology, this transformation is having a direct impact on the talent required in the financial sector.
Automation is emerging as the key driver of change, according to LFF, which consequently expects job declines in certain areas. “Highly skilled personnel who have the ability to work closely with technology or to develop and deploy automation technologies will be in high demand,” the study said. As such, finance professionals spend almost half their time collecting and processing data. As technology advances, it is expected to help increase the volumes and improve the quality of these activities.
Taking the example of mortgage applications, LFF explained that this is a process that can be "highly" automated. "Automation can dramatically speed up mortgage processing while reducing default risk and eliminating processing inconsistencies", but also "improve customer satisfaction, through instant pre-approval". In this way, automation frees up time for high value-added tasks such as customer advice, handling unusual requests or exception handling. These are tasks that require both expertise and human judgement.
All segments are affected
The surge in automation does not mean that bankers will not need to acquire data management skills. In fact, the skills required will be higher and more demanding. On this point, LFF was adamant: "Serving clients in this new data-driven environment will require bankers of the future to be increasingly technologically proficient, to know how to model rich data sets." To do this, the banker of the future will need to master artificial intelligence and machine learning techniques to, for example, predict market movements or define client risk profiles.
Beyond the banking sector, all financial services are witnessing a transformation driven by automation. The asset management segment is seeing changes in its business towards the "remote economy", notably due to its "increased dependence" on digital channels and the implementation of multi-channel services.
On the asset management side, "the power of data and the emergence of new technologies are fundamentally changing investment identification, portfolio management, distribution and client interactions", Luxembourg for Finance stated. In this sense, quantitative analysts with advanced statistical and mathematical training will be in great demand in the job market.
Old and new professions
Insurance companies are also no exception to the trend. The emergence of "Insurtech", pay-as-you-go car insurance models, blockchain-based insurance solutions and the development of cyber insurance offerings that have to take into account data protection requirements are all signs that the insurance industry has already jumped on the digital transformation bandwagon.
In addition, traditional business lines, such as legal and regulatory compliance functions, are also undergoing metamorphosis. As financial services processes become more digital, in-house lawyers and compliance officers have no choice but to base part of their analysis on data extractions. This development is even giving rise to the roles of data protection officer (DPRO) or IT compliance officer. And unsurprisingly, emerging professions, such as ESG analysis roles, naturally have data management as their core business.
Ultimately, all of these developments in the financial services industry favour professionals who can add value to their employers in complex matters that require human judgement and expertise. In view of the talent shortages currently affecting the financial sector, both in Luxembourg and internationally, these ongoing developments accentuate the need to adapt academic training to the new demands of the job market. This is without taking into account that, if these changes are motivated by the growing importance of data, the level of maturity of financial organisations in this field must be reinforced .
Read the original French version of this article on the Paperjam site. This article was published for the Paperjam+Delano Finance newsletter, the weekly source for financial news in Luxembourg. Subscribe using this link.