November 1, 2022
Fintech firms need people who can find ways to scale quickly in highly regulated industries while competing, partnering, or collaborating (or all three) with incumbent players. Incumbent firms need leaders who are agile and can accelerate a digital transformation journey to drive efficiencies, enhance products and go-to-market solutions, as well as create new revenue opportunities.
Access to qualified and suitable talent remains one of the biggest challenges for fintech start-ups, scale-ups, and incumbent financial institutions alike. Even before the challenges brought about by COVID-19, rapid changes in financial services were driving increased competition for talent. Venture dollars flowing to the fintech sector were an accelerant. Add to that the billions that incumbent firms were spending internally on digital transformations, and you had a lot of cash fuelling demand.
With the coronavirus pandemic, we saw a massive increase in the demand for digital services and the people who can deliver them. For example, in the UK alone, within the first six months of the pandemic 6% of the UK adult population — 12 million people — signed up for or used a mobile banking app for the first time.
Simultaneously, the fintech sector is experiencing elevated levels of resignations and layoffs on the back of a shift in market conditions and a significant drop in valuation. The stock of publicly traded fintechs is now significantly off their IPO prices, and some private fintech unicorns are announcing majorly down rounds.* Clearly, recruiting and retention are going through a period of upheaval without recent precedent.
Headquartered in Zurich, Switzerland, Egon Zehnder is the world’s largest privately held leadership advisory and search firm, offering services in executive search, board consulting, and leadership strategy. Its financial services practice is the largest in the industry. Egon Zehnder’s tech-enabled practice includes core technology, payment, transaction services, software, and services, as well as Web3, blockchain, artificial intelligence, and data analytics.
Axelle Sznajer, based in London, leads Egon Zehnder’s Financial Services Practice for the UK and co-leads Egon Zehnder’s activities around tech-enabled services, working with every company from publicly traded to privately owned, with entrepreneurs and with venture-backed organizations.
Q. Axelle, fintech is a very big space. How do you define it at Egon Zehnder?
A. I think a key aspect of understanding the sector is precisely to ask that question. Fintech is key to understanding the shift in financial services. I don’t believe that fintech is a space, per se. It is much more a fundamental transformation of the way we deliver and also consume financial services, which in turn affects retail consumers, businesses, and wholesale institutions. It is not underpinned just by advances in technology, but also by different sets of behaviours that have completely redefined the way we want to be served. Everything around design and thinking about customer engagement, speed, efficiency, and omnichannel — the ability to transact across different channels. When you shop, you want to be able to transact physically, on your mobile, or on any other connected device. That requires a completely different way of consuming and delivering financial services.
If you think about the impact that has around data, market insights, privacy, authentication, authorisation, etc. — that’s all fintech.
Rather than about fintech, we talk about tech-enabled financial services. It’s much more about the future of financial services. The other thing, which is important to acknowledge, is that it’s not new. Technology has been at the core of financial services for a long time. It is much more prominent now, and people like to label it. It’s gone from being the complex, cryptic sciences being done in the darkroom or basement to being much more engaging for the boardroom. It has a big impact on all aspects of the way we live, work, and engage.
It’s become more topical with technology being ubiquitous and with people having more connectivity. As a result, the topic of fintech is much more prevalent now, but it’s not new. It’s about the impact on financial services, not really a “space”. It’s important for me to start by saying that.
Q. How have recently announced layoffs with the likelihood of more to come affected the recruiting landscape? Are you seeing hiring plans changing as conditions change?
A. All markets and all sectors have been impacted, not just fintech. It really depends on the brand and on the sustainability of the business model. That’s why attracting, recruiting, and retaining talent should never be a short-term or transactional activity. It has to be something connected to the culture and part of a broader talent and people strategy.
Companies have to invest in culture, and in defining their purpose as well as their values. They need to be clear about roles and responsibilities and how people can grow. Ideally, they should also have development plans for their top employees and know what motivates them. If you fail to create an environment where these topics are addressed, there is a risk of disenfranchising the people you want to retain or the new hires you want to secure, especially in times of uncertainty and layoffs.
Layoffs are painful, there’s no question about that. But at times, changing market conditions make them necessary. If you are able to convey the vision of your organisation, the viability of your business model, the strength of your culture, and your ability to secure funding if needed, then your organisation has a stronger chance of limiting the impact of layoffs and continuing recruiting efforts.
You know the old saying that people don’t leave companies, they leave people?
Q. Yes. Bad managers drive good talent out.
A. Conversely, they don’t just join companies. They also join people. If you are able to create a sense of your culture, a vision for your organisation, and a business model that is sustainable, you can go through with your layoffs while at the same time maintaining hiring efforts because people will understand what you are trying to achieve in the medium to long term.
Q. In which sectors are you seeing the most activity right now?
A. As you said in the beginning, things have changed. If you had asked me a few months ago, I think I would have said there’s a lot of activity in BNPL (buy now, pay later). It’s still a very active space, but we’ve seen a bit of a slowdown because the market needs to mature and increasing interest rates will challenge some of the business models.
I would say one area is the verticalisation of payment solutions, or what we call integrated payments. This is a buoyant sector fuelled by the desire to create bespoke solutions that are specific to the needs of a particular market segment so that merchants can respond to their own customer needs. There’s a big focus on integrated solutions for gaming, gambling, hospitality, education, retail, health, and wellness. These are the segments that generate a lot of activity.
I think with everything that has consumer and SME lending propositions leveraging new initiatives such as open banking and open finance, there’s quite a lot of activity and a lot of new solutions — embedded finance, account-to-account payments, digital identity for SMEs and standardisation of credit solutions.
On the last point, I would say there’s a lot of activity in financial services software, i.e., software solutions for the insurance market, for capital markets, and for asset management.
Q. Other than in BNPL, in which sectors can you discern a slowdown?
A. In digital banking. I think we’re going to see consolidation in the sector. The credit squeeze has had an impact as well, but it’s more about the current players having to rethink their business models. That’s where we’ve seen things slow down the most.
Q. What about crypto? Has activity slowed in this area and has it become harder to lure talent to crypto-focused firms?
A. We actually see quite a lot of activity in this space, and we’ve worked with a number of the key players supporting their desire to attract talent. On the one hand, you’re quite right. There’s still a lot of suspicion about the sector. It’s not yet freely adopted as a payment instrument for regular commerce, and the volume is relatively low. One thing we need to see for wider adoption is stronger regulation and ease of use.
But actually, as a financial instrument, it is much more widely used. In Asia, half of the hedge funds and 20% of family offices use it as a financial instrument in the regular course of business. So, it depends.
It is definitely a sector that is associated with a lot of risk and not everyone is willing to take on that risk. But we’ve seen crypto winters before. It’s not the first cycle of ups and downs, and it is recognised as a sector that canoffer tremendous opportunity.
There’s a subset of the executive community or the talent pool who are able, interested, and have a strong desire to be early adopters. It really depends on who you are. There is definitely a pool of talent that is able to appreciate this.
I think the short answer is that it depends on your appetite for risk and your ability to understand the ecosystem — and then choosing which player you want to back. I wouldn’t say it’s a slowdown. Maybe it is if you take a snapshot of where we are today, but if you look at the medium to long term, it’s probably just another bump in the cycle.
Q. Are the traditional levers employers use to attract and retain people still effective, or should they be approaching the challenge differently? Are companies adjusting compensation packages rapidly enough to reflect the realities of 2022 (i.e., higher inflation and stock options underwater)? Are candidates today looking for something other than traditional compensation packages?
A. Compensation packages have increased across the board, not just in fintech. It’s about the law of supply and demand and we have an incredibly complex market right now. There’s a real scarcity of talent because you are competing with new factors such as early retirement, people following their passion and doing something else (teaching, etc.) or executives just deciding to take a career break.
Demand is strong, but recently we have had to deal with increased inflation as well. In addition, there is risk aversion, so you need to compensate people adequately for making changes.
Q. What regional differences are you seeing in Europe? I’d guess the demand for fintech talent is still strong in London. What about Paris, Frankfurt, Milan?
A. We are seeing some interesting regional spikes. We still see a lot of activity in London, but also in Amsterdam, Paris, and Germany. They tend to be more mature markets, with more sophisticated players and with organisations that have a breadth of services across different geographies, so they need different types of talent.
We’ve seen very strong technical and engineering talent in France, for example. They have excellent tech talent. There have also been a number of unicorns with strong valuations, so France has been an interesting country.
Q. Which skills are most in-demand right now? Which positions are hardest to fill?
A. I’ll give you two answers. If you look at the data from the Centre for Finance, Technology and Entrepreneurship in the UK, the top role in demand in financial services and fintech is Data Scientist. More than 55% of the roles in demand revolve around data insight and analytics. We are definitely seeing that.
We also see tremendous activity around CTOs and CPOs — Chief Technology Officers and Chief Product Officers. These are some of the hardest to fill. Also, to some extent, we see a difference between Europe and the U.S., with a much greater scarcity of talent in Europe.
Another area where we’ve seen a lot of activity is in the commercial function because companies that are starting to gain scale reach a real imperative to instil greater rigour and discipline in their sales and business development processes. It’s not just about pure selling, but also about creating the capability and building the organisation required for this function.
Q. It’s one thing to hire executives from a diverse talent pool, and another to retain these executives. What can you say about best practices when it comes to developing and retaining diverse talent?
A. There are a few important considerations. The first is for an organisation to really understand what diversity means for them. We often ask the question, “Why do you want diversity?” What does it mean to them in the context of their culture and their decision-making process? What does it mean to them both internally and externally?
Then we have to ask how committed the organisation is to their diversity agenda. I say this because, and as I am sure you can appreciate, we get a lot of requests for a diversity of talent. But when the time comes to assess or select the leader, old habits die hard, and companies tend to hire what they’re familiar with. So, it’s quite important to spend time early on to learn how committed they are and what steps are they planning to take to integrate this new hire into the organisation.
Another key factor is defining the role specification mostly based on the leadership skills and potential to grow, and not just based on past experience. I often say, “assess before you judge”. Find the reasons why leaders will succeed with the right support system and without focusing entirely on the reasons why they won’t succeed.
Diversity without inclusion is not sustainable. You have to think about how you’re going to make someone successful. That may actually be the answer to your question. How do you integrate — not onboard — but how do you integrate someone from a different background?
Diversity is not only about gender or ethnicity. It can also be a different experience set or having different decision-making processes as well.
Q. Hiring in an environment of constant disruption and change means hiring people who can thrive in that environment. You can’t necessarily hire for a particular skill or credential because the target keeps moving. Given this, how do you evaluate a candidate’s potential to succeed in a changing environment?
A. I think you’re absolutely right. The way we’ve approached this, for quite some time, is not by asking how you can spot and attract talent, but to shift into asking how you can spot and attract potential — which is critical as we are now operating in a much more complicated environment.
We’ve focused on hiring for potential versus hiring for experience and developed a simple yet very powerful model to help us define potential around four key criteria: curiosity, engagement, insight, and determination.
Curiosity is that drive to learn or hunger to learn new things about the outside world or about oneself. So, it’s someone asking, “Who am I as a leader? How do I continue to grow?”
Engagement is the ability to engage hearts and minds, not just around facts and logic, but also by connecting emotionally.
Insight is the ability to connect the dots. It gives you an edge, to bring insights and best practices from the outside world in terms of both the sector and the function.
Determination is relentless drive, resilience, and tenacity to deliver an outcome. But sometimes it also identifies when to lose a battle to win the war.
If you think along the lines of potential, it gives you a framework where you don’t always look only at experiences and competencies, but you use a set of criteria which will enable you not only to assess whether an individual is able to complement/engage/onboard with the environment, but also with how goals may change. They will then be much more effective in tomorrow’s world.
Interestingly, if you use that same potential model, it fuels a diversity of thinking and a diversity of backgrounds as well. This focus on potential is relevant whether you talk to large, established organisations, startups, or even when you talk to VC companies. The scale of the organisation becomes irrelevant.
The disrupters of yesterday are being disrupted today. That is why it’s incredibly important to think along these lines.
Q. At what point should a startup reach out to you for help finding talent? In general, how far along do they need to be before they call you for recruiting help? When is the right time to begin assessing and evaluating talent in a disciplined and systematic way?
A. Whether it’s calling Egon Zehnder or having a thoughtful, structured recruiting process, I think it’s important to do it ASAP. The sooner the process is established, the more efficient your recruiting process is going to be. Otherwise, you’re just not going to do it the right way.
Q. Are fintech firms reaching out to you for help identifying new, independent board members? If so, what are they looking for?
A. It’s quite interesting. We’re doing an incredible amount of work with established organisations that want to bring technology expertise onto their board — technologists or leaders who come from digital or technology firms. But we are also working extensively with tech-led companies — VC- or PE-backed — to help them build their boards.
It’s true that it’s often been in preparation for an IPO, and this has been affected by the slow-down in the IPO market, but a number of growth organisations recognise that at some stage they will benefit from adding independent talent to their board to support them through their scale-up journey.
Scaling requires a very different skill set, either for the CEO or the executive team. They need a reference point. They often want to bring on someone who has seen the movie, who can share their experiences, coach the team, but also give the team the confidence to take risks. CEOs also want mentorship from someone who has “been there, done that”. We definitely see quite a lot of that.
Q. The quality of the board’s contribution is dependent in part on the dynamics in the boardroom. Any advice for a startup CEO on managing a board to maximize its effectiveness?
A. The chair plays a key role in setting the tone for the dynamic around the board table. There’s no question about that. In well-functioning boards, everyone can contribute, and not just in their own area of expertise. That is very important.
Engagement on the part of the board with the CEO, and also with the rest of the executive team, is important. You need a certain level of governance and a certain level of independence, but you want to make sure that your board members understand the business and understand the ways they can support the team and act as mentors to different people within the organisation.
Q. Are firms today casting a wider net for board members or are they looking at the same people who have traditionally been tapped for that role?
A. It depends. There are certain areas that boards didn’t traditionally cover that they now want to cover. Having someone on the board who understands technology is absolutely essential.
Topics such as ESG are going to be important. Whether it’s environmental, social, or governance issues, these topics need to be covered. You may have wondered whether you need a person because you could argue that ESG is the responsibility of everyone on the board. We’ve seen boards bring on someone who is a champion and able to educate the rest of the board, to raise its visibility for everyone.
Strong customer focus is also of growing importance. Some boards have said they need to bring on someone who will be the voice of the customer, and then ensuring diversity is key as well.
So you have this mix of themes, but the way they are applied to the board depends on the organisation.
Q. The ideal candidate for a role may reside beyond regional borders. Now that we see the extent to which remote work is possible, are companies still interested in paying people to relocate? Is relocation even necessary?
A. It’s hard to give you a blanket answer. It depends on the organisation.
First, it’s true that we’ve seen the globalisation of talent and therefore, in theory, you can attract talent from across geographies. But that also means that retaining your talent is going to be harder because your talent can also be attracted somewhere else. Whatever you are thinking regarding the hiring of talent, you also need to consider the retention of talent.
The second thing is the impact on culture. At the beginning, or maybe just after the beginning of the pandemic, there was a big focus on how we operate in a virtual world. Today, the focus is on how we operate in a hybrid environment. Ensuring that you create the right culture is going to be really important.
So relocation really depends on the level and on the sector. Yes, you have more flexibility, but at the same time, you have enormous pressure on leaders to be able to lead in a hybrid environment. It’s not so easy.
Q. Digital transformation of established financial services firms requires large-scale organisational change. Finding people with vision who can define and lead change of this magnitude is a make-or-break factor for these firms. Do you look inside financial services or is it easier to find the necessary strategic acumen elsewhere?
A. We are looking broadly, and my advice to any organization is to do so. The words “digital transformation” can mean so many different things to different organisations. Does it mean you need to upscale your technology? Does it mean you need to create a much more agile environment? Does it mean you need to rethink how you operate or create a different culture? Or create different products? Or a better UX?
These are different goals, so you will need expertise that may lie in different sectors. We always look much more broadly than financial services, but first we spend a lot of time thinking about exactly what the organisation needs.
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* Half a trillion dollars wiped from once high-flying fintechs — July 18, 2022, The Financial Times.