Does banks' lack of innovation turn off tech talent?

Despite being among the biggest spenders on technology, banks have a reputation for being slow to innovate. In a world where financial institutions are increasingly competing with cool and nimble technology firms for talent, are they in danger of losing out?

The likes of social media, mobile and tablet apps and cloud computing have been around for a while now, but it's only in the last year or so that they've started to seriously gain any traction in the financial services sector. Even now, despite the cost advantages of moving infrastructure to the cloud, the conversation is still focused on security and compliance issues.

This year, banks are set to spend 87% of their tech budgets on maintenance, according to a recent study by Celent, which suggests innovation is going on to the back burner even more. This could be a problem – banks pay technologists more than other industries, but in order to attract the best and brightest, they need to be able to offer exciting projects.

"In terms of embracing a paradigm shift in new technology, banks are often slow to respond due to various legislation and compliance issues," says Ralph Silva, an analyst at SRN. "However, their reputation for lacking innovation is unfair – banks are experts at developing new technology around operational efficiency and reducing transaction speed for clients."

At a graduate level, investment banks in particular have gradually increased the number of new recruits into technology. They've struggled to fill these vacancies, with deadlines often extending into January or February when any front office roles have long closed to applications. As we pointed out recently, the number of applications for every bank IT role is around 8-12, compared to a 30:1 application ratio for front office positions.

However, it's not just at entry level where this is a problem. Banks are increasingly looking to poach staff from large tech companies like Facebook, Google or Apple to develop real-time trading applications or algorithmic programmes.

Mark Warburton, director of IT recruiters Pioneer Search, which has worked on mandates for banks and hedge funds to target employees of large tech companies, suggests the culture of banking puts off a lot of people.

"In small and large tech firms alike, the working environment is relatively laid back, and they actively foster innovation, often giving employees the freedom to work on their own projects," he says. "Banks are great at developing cutting edge e-Commerce platforms, and low latency trading systems, but they're never first adopters of new technology. This, combined with a very hierarchical working environment, can deter some people."

In terms of addressing how bank should be using new technology, firms often consult younger members of staff, suggests Banking Technology.

The financial sector has also seen some success in attracting innovative talent recently. As we mentioned, as banks move more into developing mobile and tablet applications, technologists have been swayed across from digital agencies for more lucrative roles in the financial sector.