ICT IN THE FINANCIAL SERVICES SECTOR

Assessing the Human Resource Needs

ICTC

SUB-SECTOR STUDY

ICTC / CTIC 116 Lisgar Street, Suite 300 Ottawa, ON, Canada K2P 0C2 T: (613) 237-8551 F: (613) 230-3490 E: info@ictc-ctic.ca W: http://www.ictc-ctic.ca

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TABLE OF CONTENTS

Note On June 29, 2012 ICTC will be presenting this report to its expert panel for final review and validation. The expert panel’s feedback will be incorporated shortly after and the final report will be sent for translation and design prior to re-posting on ICTC’s website. About ICTC The Information and Communications Technology Council (ICTC) is a centre of expertise in ICT business intelligence, labour market research, policy development and workforce solutions. ICTC enables industries to maintain a competitive advantage in a global market and develop Canada’s future skilled and innovative talent.

Executive Summary ................................................................................................. 3 1.0 Introduction .......................................................................................................... 5 2.0 Methodology ......................................................................................................... 6 3.0 ICT and the Global Economy ............................................................................... 6 4.0 The “Techno-Finance” Industry ............................................................................ 7 5.0 International Outlook on Financial ICT ................................................................. 8 6.0 Defining the Financial ICT Workforce .......................................................................... 12 7.0 Labour Market Trends in Financial ICT .............................................................. 13

7.1 Canadian Outlook ........................................................................................... 13 7.1.1 Ontario ................................................................................................. 15 7.1.2 Quebec ................................................................................................. 16 7.1.3 British Columbia (B.C.) ......................................................................... 17

8.0 Financial Services Identify Shortages ................................................................ 18 8.1 Impact of ICT on Financial Services ............................................................... 19 8.2 Top HR Challenges and Recruitment Programs ............................................. 19 8.3 Recruitment Programs in Banking Services .................................................... 20

9.0 The Future of the “Techno-Finance” Industry ..................................................... 21 10.0 Conclusions ..................................................................................................... 22 11.0 Endnotes .......................................................................................................... 23

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EXECUTIVE SUMMARY

The economic turmoil that engulfed the globe in 2008 impacted the Financial Services industry more than any other industry, with many financial firms forced to shut their doors permanently, while others looked to government intervention and still others were forced into consolidation. The new global paradigm has created immense pressures on financial institutions to generate revenue and derive profits on an ongoing and immediate basis. In order to keep up with the demands of a globally integrated marketplace, financial firms are increasingly turning to information and communications technology (ICT) to consolidate their infrastructure and design products and services that are both safe and efficient for end-users.

ICT has long been a critical component to the success of the Financial Services sector. Often described as e-finance, technology in financial services refers to the accessibility of financial services through the use of electronic communications. ICT products, services and applications are applied to financial services in three key areas: 1) electronic payments systems; 2) the operations of financial service companies; and 3) the operations of financial markets.

New developments in ICT have become the driving force for innovation and business development across the global Financial Services industry. Not only has ICT changed the internal business practices of financial services companies, it has become indispensable to their products and services. This convergence of ICT and financial services has created a new paradigm in

the digital economy—the “Techno-Finance” Industry.

Originally intended to support financial services, technology has transformed financial transactions and the breadth of services and products offered by financial services companies. According to the OECD, financial services accounted for ten percent of total worldwide ICT spending (US$ 3 398 billion) in 2009.

The Financial Services industry led all other industries in worldwide ICT spending during the most recent recession and continues to do so today. By 2013, North American banks are expected to spend US$ 56.3 billion on ICT.

Despite the growing demand for ICT governance and transparency requirements, many firms have been forced to consolidate their ICT budgets following the 2008 recession. In this environment, ICT workers will need a blend of skills and experience to handle the new challenges of the global economy. According to the International Labour Office (ILO), ICT employees working in financial services who have strong financial and business skills are likely to fair the best in the aftermath of the recession.

Based on ICTC’s extensive consultation with representatives from Canada’s Financial Services sector, managers involved in the hiring and recruitment of ICT workers identified skills shortages in many leadership roles at the intersection of ICT and business. According to representatives from the banking industry, skills shortages are more

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pervasive at the managerial and executive levels. Jobs such as IT Executive, Chief Information Officer (CIO) and Vice President of IT Operations are typically the most difficult to fill. These professions require not only strong technical skills and business knowledge, but also soft competencies and a track record of managing key projects and milestones from start to finish.

The Financial Services sector is experiencing skills shortages in occupations that are most critical to business strategy delivery. These shortages have impacted the three

major segments of the Financial Services sector: (1) banking services; (2) insurance and (3) investment management. Significant shortages in Technology Specialists have been reported in each segment; according to a study undertaken by Deloitte1

for the Toronto Financial Services Alliance (TFSA) in March 2007, indicated that all three industry segments -banking, insurance and investment, experienced 21% shortage of technology specialists. As per the findings of ICTC, the financial services sector has underlined the need for ICT skilled workers especially for the executive roles.

IMPACT OF ICT ON CANADA’S FINANCIAL SERVICES SECTOR

Consultation with financial services representatives involved in the hiring of ICT workers brought forward the following points: ICT is very important to the

Canadian Financial Services sector, both in terms of innovation and in delivering day-to-day products and services.

ICT has dramatically changed the Canadian Financial Services sector and the breadth of products and services financial firms can offer.

Regarding the intersection of

technology and financial services,

security of financial transactions is the biggest area of concern that must be addressed.

Other areas of concern that should

be addressed include reliability of financial transactions and standardization of electronic transfers.

While ICT workers are important to

Canada’s Financial Services sector, it is difficult to find workers with the right blend of skills and experience, especially in senior management roles.

TOP HR CHALLENGES AND RECRUITMENT STRATEGIES Financial representatives also identified the top human resource (HR) challenges facing their industry:

The most significant ICT human resources challenges facing the Financial Services sector are labour and skills shortages.

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In order to meet the evolving needs of Canada’s Financial Services industry, cross-disciplinary post-secondary programs that integrate ICT with other components should be implemented; other notable recommendations included increasing post-secondary enrolment of global talent.

In the coming years, the global Financial Services industry is expected to place even greater emphasis on innovation, including new investments in systems upgrades. With the regulatory landscape governing financial services continually evolving, financial companies will be required to invest greater resources into

ICT governance and security infrastructure.

The shifting business paradigms of the global digital economy have been shaped largely by the growth and innovation of the Financial Services sector. ICTC foresees a growing appetite and accelerated demand for business intelligence, business analysis, mobile banking, e-trading platforms and cyber security within the sphere of financial services. This will likely create new skills requirements for ICT professionals looking to work in the rapidly evolving intersection between technology and finance.

1.0 INTRODUCTION

The economic turmoil that engulfed the globe in 2008 impacted the Financial Services industry more than any other industry, with many financial firms forced to shut their doors permanently, while others looked to government intervention and still others were forced into consolidation. The new global paradigm has created immense pressures on financial institutions to generate revenue and derive profits on an ongoing and immediate basis.2

In today’s global economy, financial services providers face many challenges. Chief among them include the growing consumer demand for disintermediation on a global scale, the need for low-cost, high-quality services, immense security concerns, growing regulatory requirements and the need to develop products and services that are accessible to consumers at any time and in any place. At the same time, financial services providers must face

these challenges on a reduced budget, with fewer resources and in many cases with outdated infrastructure.

Today, major financial services companies must deal with regulations that demand transparency, such as the Gramm-Leach-Bliley Act (GLBA), the payment Card Industry’s Data Security Standards (PCI DSS), in addition to anti-money laundering and anti-terrorism legislation. Due to government intervention in major financial institutions, governments and the public are demanding more transparency, such as increased auditing and reporting mechanisms. Globally, regulations are just as encompassing, with the European Union (EU) and the United Kingdom (UK) enacting various financial control and money laundering initiatives. To top it all off, security risks have never been higher, with fraud, identity theft and information leaks more prevalent today than in the past.

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In order to keep up with the demands of a globally integrated marketplace, financial firms are increasingly turning to Information and Communications Technology (ICT) to consolidate their infrastructure and design products and services that are both safe and efficient for end-users.

Harnessing the innovative capacity and efficiency of ICT has the potential to overcome the many challenges plaguing

financial services providers. Challenges related to cost, quality and timeliness of services, security and regulatory compliance can all be addressed by accelerating the adoption of ICT across all spectrums of the financial services environment.

2.0 METHODOLOGY

This report provides a review of the labour market trends of ICT occupations within the Financial Services sector. ICTC has collected primary and secondary data for the following financial services providers: banking services; investment services; and insurance companies. In completing the study, ICTC employed the following combination of primary and secondary research: Industry level consultations and

surveys with representatives from Canada’s Financial Services industry involved in the recruitment of ICT workers;

Secondary data analysis of Labour Force Survey and Canadian Census data; and

Environmental scan (i.e., literature review) of research pertaining to ICT in the Financial Services sector, including new and emerging technology trends, occupations and skills.

Industry consultations were used to understand the primary factors affecting the current and future demand/supply of ICT professionals in financial services, such as: a) academic programming, b) recruitment, c) retention; d) the integration of global talent in the workforce, and e) the enrolment of graduation rates of post-secondary institutions that provide ICT training in the fields of Business and Financial Services.

3.0 ICT AND THE GLOBAL ECONOMY

The integration of ICT and financial services is hardly new. However, in today’s economic climate, financial firms have to deal with more legislative requirements and security concerns

when expanding their ICT operations. Despite these concerns, ICT has long been a solution to the challenges faced by financial services providers. In order to meet the legal and consumer

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demands of the global digital economy, financial services companies must continue to invest in ICT infrastructure and technology-based solutions to survive and thrive in the competitive global environment.

The Financial Services industry has for decades reaped the benefits of ICT solutions. In the future, ICT promises to benefit financial services providers on an even greater scale. Some of the benefits of greater ICT integration include the following:

1. More efficient and cost-effective payment systems on a global scale. Between 1999 and 2010, global payment volume increased to 330 billion transactions annually, with the highest growth occurring in electronic payments, which represented 85% of all non-cash payments.3

2. The ability to meet the growing demand for disintermediation by providing consumers with greater online access to products and services. According to a recent CMO Survey, executives in various industries are increasing disintermediation channels for two primary reasons: it allows them to learn more from their customers and allows them to serve them more effectively.4

3. The infrastructure to meet ICT governance standards much more efficiently. ICT governance allows financial firms the ability to embed sustainable risk management practices internally, meet industry regulations and adhere to government compliance measures.

4. The ability to reach unbanked markets globally through mobile innovation and application development. According to the OECD, 75% of the world’s population has a mobile phone, yet only 30% of the world’s population has a bank account.5

5. Enhanced ability to deal with ongoing cyber insecurity emanating from hackers and cyber criminals. Identity theft alone costs the Canadian economy $2.5 billion annually. 6 In 2009, a combined 37% of all hacking incidents resulted in monetary loss or stolen information.7

For these and many others reasons, financial firms have a great incentive for investing and improving upon their existing ICT infrastructure. ICT provides financial services companies with strategic, business and innovative advantages to deal with legal issues, security concerns and access to global markets.

4.0 THE “TECHNO-FINANCE” INDUSTRY ICT has long been a critical component to the success of the Financial Services sector. Often described as e-finance, technology in financial services refers to “the provision of financial services and markets using electronic communication

and computation.” 8 ICT products, services and applications are applied to financial services in three key areas: 1) electronic payments systems; 2) the operations of financial service

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companies; and 3) the operations of financial markets.

In today’s financial markets, businesses rely on ICT to deliver their products and services (see Table No. 1). Originally intended to support financial services, technology has transformed financial transactions and the breadth of services and products offered by financial services companies. 9

(US$3 398 billion) in 2009.

According to the

OECD, financial services accounted for ten of total worldwide ICT spending

10 According to research conducting by Ovum, by 2015 worldwide ICT spending on retail banks will increase by an average of 24% and will reach US$ 132 billion. 11 This convergence of ICT and financial services has created a new paradigm in the digital economy—the “Techno-Finance” Industry.

Table No. 1 ICT in Financial Services

1. International Payments and Electronic Money

Electronic money has changed the ways in which financial services companies conduct business.

Possesses all of the characteristics of traditional money, with one distinct feature: information, which moves in real time.

Overcomes the barriers traditional money places on the digital economy, such as physical currency conversion, lack of capital mobility and high security costs.12

By 2020, it is estimated that the international payments market will be worth US$782 trillion in noncash transaction value and US$492 billion in transaction revenues.

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2. Accounting Records

Most companies require accounting software to manage their day-to-

day financial functions and to provide management with statutory accounts and reports.

3. Spreadsheets Spreadsheet software is commonly used by finance departments to

help monitor, track and manage cash flow. Helps a company to monitor its expenses and/or revenues.

4. Credit Control Credit control applications are essential for companies that typically

buy from or sell to other companies on credit terms. Allows companies to keep track of the amount owed to creditors and

the amount they can expect to receive from debtors.

5. Electronic Banking

Electronic banking provides companies with direct access to their banking records, which helps them save time and ensure that payments are made on schedule.

Provides companies with a fast, reliable and secure method of payment.

An Electronic Funds Transfer at Point Of Sale (EFTPOS), which refers to on-the-spot payment in the form of credit or debit card readers, provides a much more secure and efficient form of payment.14

6. ICT Governance

Addresses financial, strategic and operational risks. In order to meet industry regulations and risk management and

compliance standards, financial companies must implement regulatory measures.

Allows financial firms the ability to embed sustainable risk management practices internally in five key areas: strategy risk, operations risk, information security, business continuity and third-party risks.

The value of ICT is “not in technology alone but also in how it is applied to manage governance, risk, and compliance initiatives most effectively.”15

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By improving the quality, timeliness and delivery of financial services, ICT enables financial companies to remain competitive in the global digital economy. The utilization of ICT in financial services has been on the rise since the 1980s, when Financial Services was among the first industries to integrate computer services on a large scale. Electronic transfer, Automated Teller Machines (ATMs), automatic accounting systems, 16 computer based trading and round-the-clock access to banking accounts are some examples of ICT innovation in financial services. A more recent example of how ICT is being utilized to better accommodate financial transactions is the emergence of remote deposits, which allow users to scan and process cheques through their mobile devices.17

One of the biggest concerns regarding the application of ICT in financial services is mobile fraud detection and user authentication. In 2011, McAfee reported that mobile malware threats increased by 46% between 2009 and 2010. As more users migrate to mobile banking, threats to mobile e-commerce applications will likely escalate. As

malware threats continue to grow, banking institutions must stay ahead of the technological current in order to safeguard the financial information of their users.

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Many financial companies foresee a future intimately linked with ICT. JP Morgan Chase has developed a five-year plan to implement more efficient ICT systems, which has the potential to reduce costs by US$300 million by 2014.

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While technology-driven solutions have never been more important for financial services, the 2008 financial crisis forced many firms to reduce their ICT budget and staffing. In the future, financial services will be forced to develop technology-driven solutions to meet legislative requirements and security concerns on a reduced ICT budget. Despite these setbacks, financial services continue to spend more money on ICT than virtually any other industry, due largely to growing demand for new trading infrastructure, the growing volume of transactions which must adhere to new regulatory requirements and the need for new revenue sources.

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5.0 INTERNATIONAL OUTLOOK ON FINANCIAL ICT

The tumultuous financial recession of 2008 impacted the global economy in many different ways, most notably in the cuts to infrastructure spending and job loss in various sectors. Global ICT spending declined by three percent in 200921 and as much as 5.2% on end-user spending22 (Figure No. 1), as many

large firms were forced to consolidate existing ICT infrastructure and lay off a large number of workers. Among the hardest hit were financial services companies, with large firms such as JP Morgan Chase announcing the elimination or redeployment of up to 3,000 ICT-related jobs.23

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Source: Gartner (2009). IT Spending 2010. Gartner Perspective.

Despite the global downturn, ICT spending in banking and investment services is growing worldwide. ICT spending in North America is expected to be 2.4% higher in 2012.24

The Financial Services industry led all other industries in worldwide ICT spending during the 2008 recession (Figure No. 2). By 2013, North American banks are expected to spend $US56.3

billion on ICT.

25 Financial services in the Asia-Pacific region are experiencing the largest growth (6%) in ICT spending in 2012 and will reach $59.4 billion by the end of this year. ICT spending among Asia-Pacific banks is expected to grow by 5.9% in 2013. ICT spending in Europe is growing very modestly in 2012 (0.3%) and is estimated to reach $59.2 billion by year’s end and $59.6 billion by 2013.26

0 100 200 300 400 500 600 700 800 900

1,000 -2.6%

-8.2% -5.7%

-10.4%

-16.2% 0% 1.8%

2.5%

Bill

ions

of U

S$

Figure No. 1 Regional End-User Spending on ICT (Billions of US$)

2008 2009

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Source: Gartner (2009). IT Spending 2010. Gartner Perspective.

In India, ICT adoption is fueling the insurance industry, which is undergoing a dramatic transformation in response to growing demand and regional competition. According to Kaylan Banga of Netscribes, an India-based research company, ICT spending in the insurance industry will have a compound annual growth rate (CAGR) of 14% until 2015. This growth is attributed to the large appetite for ICT in various sectors of India’s rapidly evolving market, including fierce competition among ICT vendors.27

In South Africa, financial and related business services control over 30% of total ICT expenditure. In developing countries outsourcing is not a feasible option for most ICT functions, which forces financial firms to carry out their work in-house.

28 Perhaps the most significant trend in South Africa and other BRICSi

i Brazil, Russia, India, China and South Africa.

countries is the growth of mobile banking. The power of mobile technology has enabled users around

the world to do more with their mobile devices. In the developing world, there is a strong appetite for mobile banking, which has the potential to bring financial inclusion to unbanked populations, which represent up to 70% of the world. 29

While the 2008 recession prompted many industries to cut ICT staffing, with one poll

This leaves the potential for a very large untapped market in mobile finance in the developing world.

ii indicating that more than one-half of decision makers projected to cut ICT jobs by as much as 15%,30

ii Gartner, 2009.

financial services companies around the world have been forced to adjust to new legislative requirements and security rules. Because compliance, regulatory and security standards are governed and executed in large part by ICT infrastructure, banking services are ahead of the current in post-recession ICT investment.

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000

Agriculture, Mining and Construction Healthcare

Transportation Utilities

Services Retail

Communications Manufacturing Public Sector

Financial Services

Figure No. 2 Global ICT Spending by Industry (Millions of US$)

2008 2009

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Although financial services lead all other industries in global ICT spending, many firms have consolidated their budgets, despite the growing demand for ICT governance and transparency standards. In this environment, ICT workers will need a blend of skills and experience to handle the new challenges of the global economy. According to the International Labour Office (ILO), ICT employees working in financial services who have strong financial and business skills are likely to fair the best following the 2008 recession.31

In the coming years, the global Financial Services industry is expected to place even greater emphasis on innovation, including new investments in systems upgrades.

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The shifting business paradigms of the global digital economy have been shaped largely by the growth and innovation of the Financial Services industry. ICTC foresees a growing appetite and accelerated demand for business intelligence, business analysis, mobile banking, e-trading platforms and cyber security within the sphere of financial services. This will likely create new skills requirements for ICT professionals looking to work in the rapidly evolving intersection between technology and financial services. While maintenance of traditional ICT platforms will continue to play a role, the global Financial Services industry is “realizing the competitive advantage of modernizing their core systems and byzantine legacy systems.”

With the regulatory landscape governing financial services continually evolving, financial companies will be required to allocate greater

resources into ICT governance and security infrastructure.

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6.0 DEFINING THE FINANCIAL ICT WORKFORCE The growth of ICT in the sphere of financial services has created new business opportunities for banks, investment firms and insurance companies, despite the sharp increase in security threats and ICT regulation. Thus, financial services providers must mobilize their ICT infrastructure against security breaches and toward more comprehensive controls and auditing mechanisms. In order to do so, financial companies will need highly skilled ICT professionals with the skills to adapt to new technologies and respond to the needs of the global digital economy.

ICTC draws in part from Census/Labour Force Survey (LFS) data to determine the scope of ICT workers within the

Financial Services sector. We begin by looking at fourteen “core” ICT occupationsiii (i.e., NOCSiv) employed in the Financial Services sector (NAICS v

iii Core ICT occupations are occupations that support or produce ICT products, services, systems or applications. These occupations require a minimum of one year of formal training in ICT, with more training typically required by most companies. For a list of the core ICT occupations, refer to Appendix A.

52). When consulting with industry representatives, ICTC used a list of “common” job titles to help employers identify the ICT workers most critical to the Financial Services sector. These common job titles, which are listed below, were then mapped to the occupations listed in the NOC system.

iv National Occupational Classification System. v North American Industry Classification System.

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Analyst (includes technical, hardware and systems analyst roles)

Technician (includes computer network, user support and system testing technicians)

Programmer Computer/Software

Engineer/Developer

IT Manager or Executive IT Business Analyst/Information

Systems Analyst Web/Application Developer IT Security Systems Specialist IT Infrastructure Architect IT Consultant

7.0 LABOUR MARKET TRENDS IN FINANCIAL ICT Through the use of ICT, financial institutions are able to provide their clients with greater access to products and services, banking solutions and real-time information than ever before. As leaders in technological innovation and ICT integration, financial services companies view technology as a critical component to their success. Thus, the key question to explore is: how has the rapid integration of ICT impacted the human resource requirements of financial services companies?

ICT in financial services has created opportunities for ICT professionals in various areas, such as banking, mobile technology, security, software development, computer hardware, user

support and IT business analytics, among many others.

With ICT set to play a more pivotal role in the financial markets over the next decade, banks and investment services will have to update their business models to remain competitive. According to a 2011 study conducted by TownGroup, “technology will be essential to the success of industry operators seeking profitability after three years of high credit losses, hyperactive regulators, and general economic stress.” 34

This means that financial services companies will need capable ICT talent to continue to push innovation within the sector.

7.1 CANADIAN OUTLOOK ICTC’s 2011-2016 Outlook report predicts that Canadian employers will need to hire more than 106,000 ICT workers by 2016 to meet labour demands. These demand requirements

impact industries across the Canadian economy, including Financial Services. Figure No. 3 provides a breakdown Canada’s ICT workforce within the Financial Services sector.

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In the Financial Services sector, there is a growing demand for Information Systems Business Analysts, IT Security Systems Specialists and professionals specializing in ICT governance. Based on ICTC’s consultation with subject matter experts in banking services,

investment services and insurance, senior management positions are often the most difficult to fill, with employers citing a lack of soft skills and proven experience completing major projects as the most significant issues.

1North American Industry Classification System (NAICS) 2007

Based on latest available data, vi vi Statistics Canada (2006). 2006 Census Special Tabulation.

over

5.3% 10.4%

27.9%

22.8%

19.5%

14.1%

Figure No. 3 Financial ICT Workforce in Canada by Occupational Group (February 2012)

Managers

Engineers

Analysts

Programmers

Technicians

Other IT

0% 10% 20% 30% 40% 50%

Other Utilities

Retail Trade Health Care

Administrative/Support and Waste Management Wholesale Trade

Education Financial Services

Manufacturing Public Administration

Information and Cultural Professional, Scientific and Technical Services

Figure No. 4 ICT Workers by Industry1 (February 2012)

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49% of Canada’s total ICT workers in the Financial Services sector are in Toronto (see Table No. 2). By comparison, the next greatest

concentrations of Financial ICT workers are in Montreal (9.4%) and Vancouver (6.4%)

Table No. 2: ICT Workers in the Financial Services Sector, Top CMAs

Top CMAs % of Canada Toronto 49.1% Montreal 9.4% Vancouver 6.6% Quebec City 5.3% Kitchener 3.5% Winnipeg 3.3% Hamilton 2.7% Ottawa-Gatineau 2.2% London 2.1% Oshawa 2.0% Edmonton 1.7% Regina 1.5% Calgary 1.4% Rest of Canada 9.2%

Total 100.0% Source: Statistics Canada (2006). 2006 Census Special Tabulation.

7.1.1 Financial ICT Workforce: Ontario

As the heart of Ontario’s Financial Services sector, the Greater Toronto Area (GTA) has become one of North America’s top three financial services hubs and is home to Canada’s top five banks. The GTA is also home to five of Canada’s largest pension plans and six of Canada’s top insurers. Among the 41 international banks doing business in Canada, 35 are headquartered in the GTA. Between 1996 and 2005, Toronto’s Financial Services sector led all major North American cities in job creation.

More than 337,000 people are employed in Ontario’s Financial Services sector (Figure No. 5), with nearly one-half employed in banking services. Workers

in Ontario’s financial services sector are also highly educated, with 68% having completed a post-secondary degree, diploma or certificate. 35

Ontario’s Financial Services sector is built on a large ICT infrastructure, as more than 5,000 ICT companies are headquartered in Ontario. The strength of Ontario’s ICT infrastructure has made Canada a global leader in efficient payment clearance and settlement systems. Today, Canadians are the “world’s top per capita users of Automated Banking Machines and debit cards… with roughly 85% of all retail banking transactions… done electronically.”

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16

Source: Statistics Canada. 2006 Census Special Tabulation.

In Ontario, after Toronto, Kitchener has the second largest concentration of Financial ICT workers (3.5% of Canadian total). Around 44% of

Toronto’s Financial ICT workers are Information Systems/IT Business Analysts and close to 20% are Computer Programmers/Developers.

7.1.2 Financial ICT Workforce: Quebec

Montreal’s Financial Services sector has grown significantly since 2007. The city is home to over 3,000 financial services companies employing more than 100,000 people. Figure No. 6 provides a breakdown of Quebec’s financial ICT

workforce. Montreal has a strong presence of banking services such as Desjardins, National Bank and HSBC as well as insurance providers such as Standard Life and Sun Life Financial.

9.9% 5.5%

46.4%

21.4%

16.9%

Figure No. 5 Financial ICT Workforce in Ontario by Occupational Group

Managers

Engineers

Analysts

Programmers

Technicians

17

Source: Statistics Canada (2006) 2006 Census Special Tabulation.

The Quebec City metropolitan region is the second largest hub for the Insurance industry in Canada, with ten insurance companies headquartered in the city. Three of these companies (Desjardins Financial Services, Industrial Alliance

and SSQ Financial Group) are also among the top ten largest companies in Canada. Approximately 16,500 people are employed in the financial services sector in the Quebec City metropolitan region.37

7.1.3 Financial ICT Workforce: British Columbia As Canada’s gateway to the Asia-Pacific markets, Vancouver’s Financial Services sector enjoys a strong competitive advantage. With 30 international banks and 15 international financial institutions, Vancouver is one of the two International Finance Service Centres in Canada (along with Toronto). Through B.C.’s International Financial Activities Act (IFAA), Vancouver is developing an

international treasury and financial functions infrastructure, including factoring, importing and exporting, foreign exchange and back office support.38

Figure No. 7 illustrates B.C.’s financial ICT workforce. More than 38% of B.C.’s financial ICT workers can be described as Analysts.

7.1% 4.5%

43% 21.5%

23.9%

Figure No. 6 Financial ICT Workforce in Quebec by Occupational Group

Managers

Engineers

Analysts

Programmers

Technicians

18

Source: Statistics Canada (2006). 2006 Census Special Tabulation.

8. FINANCIAL SERVICES IDENTIFY SHORTAGES

Research undertaken by ICTC demonstrates that the ICT jobs in Canada are experiencing labour and skills shortages.

A labour shortage in ICT means that there is an insufficient supply of qualified applicants with the credentials (i.e., post-secondary degree) needed to apply for a job in an ICT field.

A skills shortage occurs when employers are unable to recruit workers with the right blend of skills and experience. A skills shortage is characterized by workers with educational skills but with insufficient employability skills and experience. Employability skills refer to domain knowledge, business acumen, domain knowledge and soft competencies.

Soft competencies refer to such things as behavioural skills, communication skills, an ability to interact with non-technical coworkers, teamwork, context skills and domain understanding, which arise from understanding the business context in which ICT is being applied.

ICTC consulted with representatives vii

vii Participants represented the three key segments of the Financial Services sector: banking services, investment services and insurance.

from Canada’s Financial Services sector involved in the hiring and recruitment of ICT workers in order to gain first-hand insight into the sector’s ICT HR needs. Representatives unanimously reiterated the skills shortages identified by ICTC in 2011. According to representatives from the banking industry, skills shortages are not limited to junior or mid-level professionals, but are more pervasive at the managerial and executive levels.

8.6% 5.4%

38.4% 23.6%

23.9%

Figure No. 7 Financial ICT Workforce in B.C. by Occupational Group

Managers

Engineers

Analysts

Programmers

Technicians

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Jobs such as IT Executive, Chief Information Officer (CIO) and Vice President of IT Operations are typically the most difficult to fill. Not only do these professions require strong technical skills and business knowledge, but also soft competencies and a track record of managing key projects and milestones from start to finish.

The majority of informants indicated that finding workers with the right blend of skills and experience poses a significant challenge, with soft skills such as interpersonal interaction, behavioural skills the ability to communicate with non-technical employees cited as the most overlooked skills on the part of applicants.

The Financial Services sector is experiencing skills shortages in occupations that are most critical to business strategy delivery. These shortages have impacted the three major segments of the Financial Services sector. Significant shortages in Technology Specialists have been reported in each segment; according to a study undertaken by Deloitte39

for the Toronto Financial Services Alliance (TFSA), all three industry segments - banking, insurance and investment, experienced 21% shortage of technology specialists.

8.1 IMPACT OF ICT ON CANADA’S FINANCIAL SERVICES SECTOR

Consultation with financial services representatives involved in the hiring of ICT workers brought forward the following points:

ICT is very important to the Canadian Financial Services sector, both in terms of innovation and delivering day-to-day products and services.

ICT has dramatically changed the

Canadian Financial Services sector and the breadth of products and services financial firms can offer.

Regarding the intersection of

technology and financial services,

security of financial transactions is the biggest area of concern that must be addressed.

Other areas of concern that should

be addressed include reliability of financial transactions and standardization of electronic transfers.

While ICT workers are important to

Canada’s Financial Services sector, it is difficult to find workers with the right blend of skills and experience, especially in senior management roles.

8.2 TOP HR CHALLENGES AND RECRUITMENT STRATEGIES Financial representatives also identified the top human resource (HR) challenges facing their industry:

The most significant ICT human resources challenges facing the Financial Services sector are labour and skills shortages.

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In order to meet the evolving needs of Canada’s Financial Services industry, cross-disciplinary post-secondary programs that integrated ICT with other components should be implemented; other notable recommendations included increasing post-secondary enrolment of global talent.

By far the most effective recruitment strategy participants identified is networking; recruitment agencies, online job postings, post-graduate recruitment and internal hiring were considered to be moderately effective recruitment strategies.

8.3 RECRUITMENT PROGRAMS IN BANKING SERVICES Financial services companies recruit workers through various strategies. Many banks have focused on diversity and inclusion programs in order to recruit workers. Such programs, which often target visible minorities, women, Aboriginals and IEPs, provide employers with the opportunity to tap into diverse labour pools. Below is a list of several banks and their diversity programs:

TD Bank Financial Group has a Diversity and Inclusion program designed to expand leadership opportunities for women and visible minorities.

CIBC’s Diversity Matters and Initiatives programs support employee-led affinity networks for visible minorities, as well as opportunities for professional women returning to the workforce.

Scotiabank has an active diversity and inclusion plan dedicated to leveraging the skills of Aboriginals, visible minorities, women and IEPs.

Royal Bank of Canada’s Diversity Blueprint recognizes diversity as a source for innovation and prosperity, with programs designed to attract women, visible minorities and IEPs.

The Bank of Montreal supports diversity, equity and inclusion through its Corporate Sustainability initiatives, which also sponsors education programs that provide educational opportunities for women, visible minorities and Aboriginals.

Leading banks such as TD, CIBC, BMO, Scotiabank and HSBC all have active recruitment programs designed for recent graduates in financial services, business and ICT.

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9.0 THE FUTURE OF THE “TECHNO-FINANCE” INDUSTRY

ICT has enabled financial services companies to serve their clients remotely, allowing them greater access and time savings than ever before. While convenient for both users and financial services companies, there are growing concerns over data security and user authenticity. In order to address these concerns, financial services companies will be required to use their ICT infrastructure to tackle fraudulent activities. Just as technology has been a critical component to the success of financial services companies, so too must it be utilized to address these growing concerns.

As ICT and financial services continue to synergize, financial services companies will need to update their business strategies in order to better serve their clients. The “Techno-Finance” industry will introduce new paradigms into the business world, such as:

the development of products and services that optimize both financial and technological values;viii

ensuring that financial transactions are highly secure and reliable, which will require heightened reliability standards before cyber space becomes universal;

convertibility and electronic transfer will need to be standardized so as to build universal acceptance of the technology exchange media (TEM); and;

viii For example, credit cards should not be packaged with poor telecommunications services.

with cyber space fast becoming the universal financial environment, financial companies, entrepreneurs and customers will need to be educated on the nature of this new environment.40

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10.0 CONCLUSIONS This study is intended to bring together leaders at the intersection between technology and finance in order to explore strategies for enhancing the supply of well-rounded ICT workers for the Financial Services sector. ICTC’s consultation with representatives from financial services companies allowed participants from banking, investment and insurance to consider various opportunities to expand the talent pool of ICT professionals across all levels of the career cycle (entry, mid and executive levels). The resulting recommendations point to the need to increase the Financial Services sector’s talent pool, especially in areas pertaining to soft skills, management skills and leadership. Moreover, they create a call to action for the overall sector, for academia and for individual organizations within Financial Services to adapt to the demands of the digital economy.

Our ability to prepare tomorrow’s workforce and nurture innovative talent will be vital in ensuring Canada’s competitive advantage in an increasingly global, connected and fast paced environment. Canada’s vibrant Financial Services industry needs to encourage and enable all potential human capital resources in Canada to partake in ICT, including women, Aboriginals and global talent. It will be critical that we close the gap between the needs of industry and the programs offered in academia by preparing graduates for the new business paradigm and accelerate their deployment into industry. As ICT innovation continues to be a catalyst for success in the Financial Services industry, relevant stakeholders (industry, government, academia) must work together to identify the evolving needs of industry to position Canada as a leader in global financial services.

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11.0 ENDNOTES 1 Toronto Financial Services Alliance (March 2007). The Talent Matter: Shaping Talent Strategies in a Changing World. 2 Jones, Don. (2008). IT in the Financial Sector—The Key to Thriving in a Challenging Economy. Quest Software. 3 Canadian Payments Association (2010). CAP Payments Strategy: Vision 2020. Canadian Payments Association. http://www.cdnpay.ca/imis15/pdf/pdfs_news/payments_strategy_vision_2020.pdf. 4 The CMO Survey. (2011). The Lure of Disintermediation. CMO. http://www.cmosurvey.org/blog/the-lure-of-disintermediation/. 5 OECD (2008). Information Technology Outlook 2008. Organisation for Economic Co-operation and Development. 6 Carrie Davis (2009). The High Cost of Identity Theft in Canada. Spend on Life. http://www.spendonlife.ca/blog/high-cost-identity-theft-canada. 7 The Web Hacking Incident Database 2009. 8 Franklin Allen, James McAndrews, Philip Strahan (2001, October). E-Finance: An Introduction. The Wharton School, University of Pennsylvania. Retrieved May 8, 2011, from http://fic.wharton.upenn.edu/fic/papers/01/0136.pdf 9 Verzosa, Augusto C. “The Techno-Finance Industry.” http://talinot.com/yahoo_site_admin/assets/docs/FINIT.9142648.pdf 10 OECD (2010). Information Technology Outlook 2010. Organisation for Economic Co-operation and Development. 11 Compass Plus (2011). White Paper: Optimising Payment Platforms for Profitability & Commercial Success. Retrieved Sept 20, 2011 from http://www.compassplus.com/collateral/whitepapers/231. 12 Verzosa, Augusto C. “Electronic Money: Risks, Threats, Promises to Banking.” http://talinot.com/yahoo_site_admin/assets/docs/EMONEY.9142501.pdf 13 Compass Plus (2011). White Paper: Optimising Payment Platforms for Profitability & Commercial Success. Retrieved Sept 20, 2011 from http://www.compassplus.com/collateral/whitepapers/231. 14 Tutor2u (). Applications of ICT in Finance and Accounting. Retrieved Sept 6, 2011, from http://tutor2u.net/business/production/applications-of-IT-finance-accounting.htm. 15 ANXeBusinessCorp (2011). IT GRC: Turning Operational Risks into Returns (White Paper). Retrieved Sept. 15, 2011 from http://www.fiercefinance.com/offer/anx-wp. 16 Lawrence R. Klein, Cynthia Saltzman, Vijaya G. Duggal (2003, August). Information technology and productivity: the case of the financial sector. Retrieved May 8, 2011, from http://findarticles.com/p/articles/mi_m3SUR/is_8_83/ai_108150495/?tag=mantle_skin;content 17 Osmond Vitez. Information Technology in Banking & Finance. Retrieved May 8, 2011, from http://www.ehow.com/facts_6048362_information-technology-banking-finance.html 18 Avivah Litan (2011, February). Mobile money transactions – are they secure? Retrieved May 8, 2011, from http://blogs.gartner.com/avivah-litan/2011/02/23/mobile-money-transactions-are-they-secure/ 19 Francesco Guerrera (2011 February). How the financial sector sees technology as its saviour. Retrieved May 8, 2011, from http://www.ft.com/cms/s/0/a8ff2548-3de3-11e0-99ac-00144feabdc0.html#ixzz1LllWTYjo 20 Uretsky, Sherwin, Dutta, Aron and Jim Cooke (2011). CISCO IBSG Predicts Emergence of Global Connected Marketplaces. CISCO Point of View. 21 Halvorsen, Anders (23 November, 2010). ICT Spending to Bounce Back by 2013. World Information Technology and Services Alliance. 22 Gartner (2009). IT Spending 2010. Gartner Perspective. 23 Guerrera, Francesco (2011). How the financial sector sees technology as its saviour. Financial Times. 24 Jegher, Jacob. (9 January, 2012). IT Spending in banking: A North American Perspective. CELENT. 25 Ibid. 26 Mearian, Lucas (19 January 2012). Bank IT spending to be ‘rocky’ through 2013. Financial IT. 27 PR Newswire (12 April 2012). ICT in Insurance Industry in India 2012. Digital Journal. 28 Elliott, Lauri (17 February 2010). ICT in the Financial Services Sector in Africa. Afribiz. 29 OECD (2008). Information Technology Outlook 2008. Organisation for Economic Co-operation and Development. 30 Gartner (2009). IT Spending 2010. Gartner Perspective. 31 International Labour Office (2009). Impact of the Financial Crisis on Finance Sector Workers. Issues paper for discussion at the Global Dialogue Forum on the Impact of the Financial Crisis on Finance Sector Workers. 32 Mearian, Lucas (19 January 2012). Bank IT spending to be ‘rocky’ through 2013. Financial IT. 33 Ibid. 34 Compass Plus (2011). White Paper: Optimising Payment Platforms for Profitability & Commercial Success. p. 5. Retrieved Sept 20, 2011 from http://www.compassplus.com/collateral/whitepapers/231. 35 Government of Ontario (2007). Financial Services in Ontario. Queen’s Printer for Ontario. Retrieved Oct. 3, 2011 from http://www.ontariocanada.com/ontcan/1medt/downloads/sector_brochure_FinServices_en.pdf. 36 Ibid., 7.

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37 Quebec International. “The Quebec City metropolitan region, a nerve center for the insurance and financial services industries.” http://www.quebecinternational.ca/key-industries/insurance-and-financial-services/the-industry. 38 Government of Canada (2011). “Financial Services.” Invest in Canada. Retrieved Oct. 4, 2011 from http://investincanada.gc.ca/eng/industry-sectors/financialservices.aspx. 39 Toronto Financial Services Alliance (March 2007). The Talent Matter: Shaping Talent Strategies in a Changing World. 40 Verzosa, Augusto C. “The Techno-Finance Industry.” http://talinot.com/yahoo_site_admin/assets/docs/FINIT.9142648.pdf.