The investment banking industry is heading into a digital revolution that could redraw not only its business model but also the traditional image of its staff. Stuck with dwindling profits in an era of poor returns and heavy regulation, the likes of Goldman Sachs, JPMorgan Chase and HSBC are battling to hire the best software programmers, systems engineers and data analysts, to help them get ahead via new technology and cost-cutting.
With IT expertise now a must for the boardroom, banks’ conservative workplaces are likely to undergo cultural change as they welcome ambitious, differently-minded people.
“Traditionally, banks have been a lot more narrow in their (hiring) focus. Now collectively they have realised the need to be more creative,” said Jeffrey Wallis, managing partner at SunGard Consulting Services, specialising in financial firms.
Adopting new technology is an evident strategy for industries in economic distress and investment banks have already spent billions to overhaul systems and cut staffing costs — 60 to 75% of equities now trade electronically, according to industry estimates, and that proportion is expected to continue to grow. Tighter regulation post-financial crisis has also prompted banks to overhaul their risk management systems — Goldman Sachs says it can now track and account for 6 million positions each day.
But the latest wave of technology hires has come about because banks are aiming more specifically to grow revenues by developing tailor-made products and mobile applications based on clients’ trading patterns. To do that, they need to attract the top quantitative analysts and software developers — which may mean allowing some of them to work in shorts and T-shirts from Palo Alto, California, rather than in suit and tie from a skyscraper in London’s Canary Wharf.
“In the 1980s there was an influx of technology people into financial services. There was a real wave of people and a new age way of thinking came in. That injection of new talent and thinking hasn’t really been coming in for a while,” said David Boehmer, managing partner of the Americas’ financial services division for executive search firm Heidrick & Struggles.
Spending on banking and securities IT is expected to top $471 billion this year, up 14% from 2010, and rise by a fifth again to hit $563 billion in 2017, Gartner estimates.
McKinsey consultants estimate banks have only cut operating costs by about 8% since the financial crisis. Their need to overhaul IT systems has been underscored by regular evidence