We’ve all heard about The Great Resignation currently sweeping America’s workforce. Statistics recently released by the U.S. Bureau of Labor revealed a record-setting 4.5 million people voluntarily left their jobs in November 2021, and the wave of resignations isn’t expected to slow down anytime soon. In some cases, the motivation to leave is burnout triggered from the ongoing COVID-19 pandemic. In other cases, employees that stuck with their job to maintain a sense of security are now feeling comfortable enough to test the job market.

While the hospitality and healthcare industries have seen the most employees voluntarily resign, the global drama is also playing out on the stage of financial services. Like other industries, many traditional banks are increasingly losing technology talent to fintechs and other challengers. There’s never a good time to lose top performers, but the timing is especially troubling because the pandemic is requiring financial institutions to enhance digital payment and technology offerings — work that is reliant on attracting and retaining top tech talent.

Why and Why Now?

Why Are Banks Losing This Talent?

The biggest issue facing banks that are losing talented employees is their inability to evolve past the legacy systems they rely on for core banking, payments and other mission-critical operations. These systems do not function on the cloud and are batch and business-day oriented rather than operating in real-time, 24 hours a day and seven days a week. The legacy systems cannot easily be adapted to APIs and open banking, they neither speak ISO 20022 nor understand AI, and they can’t handle blockchain and cryptocurrency. They are also ill-suited to the low-code approaches that have transformed product and service development in other domains.

In addition, legacy systems often cause operational issues for both bank employees and their customers. As a result, and because legacy systems can’t be easily extended and upgraded, most of the IT work being conducted in banks is focused on maintaining these systems and ensuring regulatory compliance — work that is proving increasingly unrewarding for ambitious technologists who are motivated to evolve their own careers.

Why Is This Talent Exodus Accelerating Now?

The ongoing pandemic has changed the way employers and employees interact. It has made it easier for employees to interview remotely and harder for companies to create the lasting connections that are needed to build loyalty.

Low interest rates and government stimulus programs have also flushed the market with capital and have raised asset prices. In many cases, the influx of capital is being funneled through greater investment in fintechs and likeminded challengers, who are aggressively going to market to attract and hire talent with compelling pay packages, frictionless work environments, and — of course — the promise of being able to work with the latest technology.

What Can Banks Do to Stem the Talent Outflow?

If the main factor driving employees to resign is frustration with legacy systems, the obvious solution is for financial institutions to replace or modernize these systems. Of course, that’s easier said than done—most legacy systems are mission-critical and cannot be replaced overnight. That means many banks will need to create a nuanced strategy that will facilitate the first steps away from legacy without “rip and replace.”

The process of evolving away from legacy systems includes more than the “usual” benefits of speed to market, lower costs, greater innovation and customer satisfaction. Leaving legacy behind will have a direct impact on employee attraction and retention because top technology experts want to work in environments with the latest tools and platforms.

There are many key technology elements of legacy modernization strategies associated with payments that would also contribute to staff retention. One of the most important is the move from traditional enterprise software solutions to cloud/SaaS/PaaS: many fintechs and challenger banks are attracting the best talent because they are cloud-native and SaaS oriented. Other key elements include moving to real-time/instant payments and maintaining 24/7 operability, investing in API enablement and ensuring ISO 20022 native capabilities across all processing and customer experience solutions. The right low-code/no-code components can also significantly raise IT productivity.

Banks that prioritize these technology elements will find themselves in an enviable position: they will quickly reap tangible business benefits from their investments, and at the same time serve as a magnet for the industry talent that they need to stay ahead of their competitors.