The hyper-buzz around the emerging fintech sector has quietened in 2016, which is less a sign of its diminishing importance and more an indication of a maturing industry.
Even the biggest fintech firms get by with a relative skeleton crew, but next year they’re likely to be engaged in a battle for tech talent with investment banks and large technology firms alike. These are the skills you need to succeed, according to the CEOs of fintech firms and industry experts.
1. Fintech firms will be battling with banks for machine learning expertise
Machine learning expertise is highly sought-after in finance across the trading floors of investment banks to quant hedge funds. Artificial intelligence is likely to be the differentiating factor across most industries in the near future and financial services firms will be battling for expertise, believes Oliver Bussmann, the former group CIO at UBS who now runs his own tech consultancy Bussmann Advisory.
“The key expertise next year in the financial services industry will be artificial intelligence,” he says. “Robotics and machine learning will drive automation and the banks will need people with Masters Degrees and PhDs – scientists, and they’ll be competing with fintech start-ups for these skills.”
2. Financial services firms will target data analysts
To some extent fintech firms can provide a solution large financial institutions' failure to make the most of the vast quantities of data they generate. But Big Data expertise is still likely to drift between smaller fintech firms and larger financial services organisations.
“Financial markets generate a vast quantity of data and many financial institutions lack the tools and expertise to properly aggregate and analyse this,” says Stu Taylor, CEO of bond information fintech firm Algomi.
“Individuals with the skills to utilise this resource to enhance a traders’ decision making processes are particularly sought after, as fintech firms seek to bring new products to market to help customers better understand their data,” he says.
3. Domain expertise will be all-powerful
So, you have the perfect product and best technologists to develop that product, but you haven’t worked out how to explain why big banks should buy it. Good luck with that. Next year, these fledgling fintech firms will bring in financial services expertise, even if they lack any technical knowledge.
“There’s going to be a battle over domain expertise. Industry specific knowledge is going to be increasingly important as large financial institutions partner with fintech start-ups,” says Bussmann. “People who can combine technical expertise with an ability to translate that into hard figures is a very important skill-set.”
It’s not just about speaking the language of financial services. Fintech firms will also have to arm their financial services experts with the skills to survive in a technology firm.
“We've taught ex-compliance officers and legal experts to code as it really empowers them to be self-sufficient and solve problems themselves without having to look for ‘developers’ to help them solve simple automation issues,” adds Andrew White, founder and CEO of regulatory fintech firm, FundApps.
4. There simply aren’t enough cyber-security professionals
Again, fintech firms are focusing on solutions on cybersecurity for the banking sector, but big financial services organisations – particularly investment banks – are investing more and more in this area.
“Wholesale banks are increasing their spend on cyber-security – from 5% of total tech budgets, to 7-8% in 2017,” says Bussmann. “It’s a critical area of investment and there’s a war for talent among banks and fintech firms.”
“We know that good security staff – even if you have the budget – are hard to recruit,” adds Alastair Paterson, CEO of cybersecurity fintech firm Digital Shadows. “And until some of the education initiatives governments and institutions have been implementing bear fruit. the shortage of good people will continue to be a challenge financial businesses, and other organisations will face.”
5. 2017 will see the rise of the business experts
Most fintech firms rely on VC funding, and this means having a strong business case and a potential pipeline of customers before the purse strings are loosened.
But as the sector matures, more firms will inevitably fold and the “second wave” of fintech means sales expertise is needed to survive, says Huy Nguyen Trieu, a former Citi managing director who now runs fintech consultancy, The Disruptive Group. More fintech firms entering the B2B arena think that it’ll be easier to snag one large banking client than a bunch of retail clients, he says. They’ve had a reality check.
“Most are now realising that selling to a large bank or large insurance company is a very long and uncertain process, where it’s hard to know if you’re getting closer to a sale or not,” he says. “Finding people who understand the processes of large banks and know how to navigate these organisations will be key.”
6. Blockchain and distributed ledger expertise will, of course, be needed
Some believe that 2017 will provide a reality check for those that think blockchain will entirely transform financial services.
“There will be a nosedive in the hype cycle of Blockchain. The few clear use cases are being done, such as global custody, but the rest will all just peter out,” says White.
Nonetheless, there simply isn’t enough talent on the market, believes Bussmann.
“There’s a shortage of talent in distributed ledger space. People who can understand the ecosystem and build applications within this environment are still in short supply,” he says.
7. New market-makers will hoover up talent
Nguyen Trieu believes that large e-commerce companies will get closer and closer to the business of financial services. Inevitably, this will mean that both technology and financial services expertise will be required.
“At the moment, there are only a few new entrants that have been successful such as Ant Financial (retail) or Citadel (capital markets), but we are likely to see this trend accelerate next year,” he says.