Digital skills gap hampering banks, claims new report

BY Fraser Tennant

A rapidly-widening talent gap is hampering traditional banks’ ability to compete and stay relevant in a digital-first world, according to a new report by The Josh Bersin Company. The majority of banks around the world are struggling to meet the need to digitalise.

In its ‘Consumer Banking Under Siege: Addressing the Digital Capability Gap’, the research reveals that most banks’ skills bases are falling behind, despite attempts to hire fresh talent, and the sector will see a massive shortage of people with suitable digital and technology skills by 2025.

Unless banks face this talent issue, the report suggests that longstanding players will never catch up with their modern counterparts, potentially losing relevance within five to 10 years. The report also suggest that banks identified as ‘trailblazers’ have a number of things to teach the rest of the market.

The report’s key findings include: (i) the digital transformation of banks is not a technology problem, but a talent challenge; (ii) most banks are struggling to offer the great digital experiences that clients now expect, but their skills base is failing to keep up, despite attempts to hire fresh talent; (iii) trailblazer banks – those moving in the right strategic direction and seeing positive business results – are applying talent intelligence techniques to look laterally at opportunities to reskill employees out of roles that are becoming obsolete; and (iv) as a secondary strategy, leading banks are also proactively targeting suitable tech talent and designing ‘irresistible’ workplaces to attract and keep them.

“Most consumer banks are currently trying to hire their way out of this talent challenge,” said Stella Ioannidou, senior research manager at The Josh Bersin Company and author of the report. “But there are not enough people with relevant tech skills to go round, particularly those who are also experienced in the banking industry.”

For example, in the US, the report notes that in 2023 there was a 54,000 discrepancy in the talent available, a figure which, if it persists, will grow into a 350,000 gap in future-ready technologists with banking experience.

“Even if banks look for tech talent without direct sector experience, they face fierce talent competition from consulting firms, IT service providers, Big Tech and so on, so they need a different approach,” she continued. “They need to reskill the people they already have and make it a priority to keep employees close and engaged – and they need to do that now, as it will take time to build the capabilities and skills they so badly need.”

Report: Consumer Banking Under Siege: Addressing the Digital Capability Gap

Financial crime on the dark web on the rise, reveals new report

BY Fraser Tennant

Cyber criminals are increasingly and persistently targeting the financial services sector, particularly banking institutions, using the dark web, according to a new report by Searchlight Cyber.

In ‘Dark Web Threats Against the Banking Sector’, the dark web intelligence company outlines the tactics cyber criminal are using against banking institutions, highlighting the most prominent threats visible on the dark web.

According to the report, the most prominent threat is initial access broker posts which sees threat actors sell vulnerabilities such as remote network access, web shells, remote code execution and SQL injection (a cyber attack that injects malicious SQL code into an application allowing the attacker to view or modify a database) on dark web forums for other cyber criminals, including ransomware operators, to exploit.

“We have observed threat actors that are known to be associated with ransomware groups interacting with initial access broker posts in this report,” said Jim Simpson, director of threat intelligence at Searchlight Cyber. “Knowledge is power, and identifying vulnerabilities being sold before the ransomware operator is able to successfully breach their organisation would be a huge win for defenders.”

Additional threats noted in the report include insider threats, where employees proactively advertise their ability to undermine the security of their organisation, as well as cyber criminals trying to recruit employees at banks, and threats against banks’ supply chains, which sees criminals identify the banks that can be impacted in posts targeting their suppliers.

The report also explains how such dark web intelligence can be used by banks in security practices such as threat hunting, internal investigations and gathering intelligence on the tactics of specific cyber criminals.

“While a lot of the cyber criminal activity described in this report sounds alarming, the point of this research is not to scare banks,” said Jim Simpson, director of threat intelligence at Searchlight Cyber. “In fact, it is to demonstrate the opportunity that the dark web provides to identify threats earlier. Banks are always going to be a target for threat actors, but monitoring the dark web allows them a chance to spot criminal activity in the ‘pre-attack’ or planning stage and gives security teams valuable time to adjust their defences.”

Report: Dark Web Threats Against the Banking Sector

FS struggling with compliance-driven tech, claims new report

BY Fraser Tennant

Regulatory compliance is the biggest single factor affecting the adoption of new technologies across the financial services (FS) sector, leaving firms vulnerable to cyber attacks and other risks, according to a new report by CMS.

In its ‘Technology Transformation’ survey of 85 senior counsel and risk managers across the FS sector, CMS found that risk managers remain engaged with digitalisation, citing the top drivers for adoption to be a response to regulatory requirements (40 percent), M&A (38 percent), customer demands (31 percent) and the adoption of transformational new technologies such as artificial intelligence (AI) (31 percent).

“The FS sector is at a crossroads, with traditional firms often having a vast number of legacy systems in place which are particularly difficult to replace or upgrade,” said Alexander von Bossel, a partner at CMS. “With technology becoming increasingly complex, technical failures, vulnerability to cyber attacks and the risk that these systems do not meet customer needs grow proportionally.”

The study also shows that the expected future risks are different to those FS firms face today. The FS sector is currently most concerned with risks related to compliance and regulation (73 percent), IT performance (62 performance) and cyber breaches and data security (51 percent).

The risks that FS firms expect to see in the future, however, include AI (56 percent), smart contracts (53 percent) and cloud migration (53 percent) – new technologies that are generally less well understood.

However, when it comes to addressing these risks, respondents cited internal resistance to change (54 percent), lack of in-house skills or expertise (52 percent) and lack of budgetary sign-off (49 percent) as the primary obstacles to minimising technology-related risks.

“FS firms may have no choice but to face the challenge of upgrading, but in addressing it, they will also reap the wider benefits of new technologies,” added Angela Greenough, a partner at CMS.

Ultimately, CMS finds that FS firms are at a real tipping point, with large incumbents eying smaller firms and FinTechs for their IP and skills to remain competitive, while considering upgrades to legacy systems.

Mr Von Bossel concluded: “Every sector faces emerging threats, but for FS firms, greater risks may lie in inaction rather than action.”

Report: Technology Transformation

Shot across the bows for UK financial services’ AML practices

BY Fraser Tennant

In a shot across the bows for the UK financial services (FS) sector, a new survey has revealed that over half of FS professionals are only “somewhat confident” in their firm’s anti-money laundering (AML) practices.

In its ‘FAML Financial Services Survey’ report, which surveyed 200 FS professionals across the UK, First AML reveals that 52 percent of respondents identified an instance of money laundering in the last year, with 23 percent identifying more than one.

Respondents also selected external risks, such as the crisis in Ukraine, people trafficking, the increased focus on customer transparency and ethical customer onboarding, as well as the increased risk of fines, as key reasons why money laundering is rising up their company’s agenda.

However, although AML is moving up the agenda, many FS companies are still facing process and compliance challenges, with the top two AML weaknesses identified as document collection for individuals and companies, including passports and share registers at 27 percent,  and training staff on the latest anti-money laundering requirements at 29 percent. 

Despite this, even though many financial services organisations are facing challenges with AML processes, and the majority have found an instance of money laundering over the past year, almost a quarter (23 percent) are considering cutting AML compliance budgets in light of the expected recession. 

“Robust document collection processes and being up to date with the latest AML regulations are essential for compliance in this area,” said Simon Luke, UK country manager at First AML. “So it is shocking that AML budgets are being cut. Without the right processes in place, companies are not only at risk of fines, but also of letting dirty money pass through their organisations.” 

In terms of business priorities, respondents selected maximising returns for investors as the top priority, followed by environmental, social and governance (ESG) and improving their bottom line. 

The survey also revealed that the growth of unethical business practices is the key reason that financial services professionals care about AML compliance. This was followed by abhorrent crimes, such as drug trafficking, arms dealing and terrorism funding. 

Report: The majority of financial services professionals are only ‘somewhat confident’ in their anti-money laundering procedure

Goldman Sachs acquires NN Investment Partners in €1.7bn deal

BY Fraser Tennant

In a €1.7bn transaction that “advances it commitment to sustainability”, US multinational investment bank and financial services company Goldman Sachs has acquired Dutch-based asset manager NN Investment Partners.

Upon completion, NN Investment Partners will be integrated into Goldman Sachs Asset Management, with the company’s more than 900 employees joining the Goldman Sachs family and the Netherlands becoming an important location in Goldman Sachs’ European business.

Moreover, the acquisition brings Goldman Sachs’ assets under supervision to approximately $2.8 trillion and affirms its position as a top five active asset manager globally, with leading franchises in fixed income, liquidity, equities, alternatives and insurance asset management.

Headquartered in The Hague, NN Partners manages approximately $340bn in assets for institutions and individual investors worldwide, with offices in 15 countries across Europe, North America, Latin America, Asia and the Middle East.

Highly complementary to Goldman Sachs Asset Management’s existing European footprint, NN Investment Partners adds new capabilities and accelerating growth in products such as European equity and investment grade credit, sustainable and impact equity, and green bonds.

In addition, the firm has been successful in incorporating environmental, social and governance (ESG) factors across its product range, with ESG criteria integrated into approximately 90 percent of assets under supervision. Goldman Sachs Asset Management intends to leverage this expertise to complement its existing investment processes, helping to deepen ESG integration across its product range and deliver on sustainable investing priorities.

“This acquisition advances our commitment to put sustainability at the heart of our investment platform,” said David Solomon, chairman and chief executive of Goldman Sachs. “It adds scale to our European client franchise and extends our leadership in insurance asset management.”

As part of the transaction, Goldman Sachs Asset Management has entered into a long-term strategic partnership agreement with NN Group, the parent company of NN Investment Partners, to manage an approximately $180bn portfolio of assets, reflecting the strength of the business’ global insurance asset management capabilities and alternatives franchise.

Mr Solomon concluded: “We are excited to welcome the talented team at NN Investment Partners, a centre of excellence in sustainable investing, to Goldman Sachs and together we will focus on delivering long-term value to our clients and shareholders.”

News: Goldman pays 1.7 billion euros for Dutch-based asset manager