I recently read Finastra's Financial Services State of the Nation Survey 2026 and found one particular finding especially interesting. Among the barriers banks face when modernizing their operations, the biggest challenge wasn't technology, budget constraints, or regulatory requirements. It was people.
“Human capital is the most significant barrier to modernization, cited by 43% of institutions who say that a talent and skills gap is stopping them from moving forward.”
What, exactly, is “modernization”? The report defines it as the implementation of the “modern platforms and data architecture that are essential to scaling AI, strengthening resilience, and delivering customer experience across channels.” In other words, all that stuff that community banks need to succeed. The bind banks are in? Implementing the technologies they need to improve efficiency and remain competitive depends on a workforce that is becoming increasingly difficult to find.
A workforce challenge like no other
For years we've been hearing that artificial intelligence would replace workers and, in some industries, it is. If AI can do a worker’s job better and faster, why are banks, according to the survey, “facing a workforce transformation challenge that is unlike any in the modern era of financial services.”
Financial institutions are facing three workforce challenges simultaneously. First, there is a growing shortage of employees with digital and technical skills. Second, a large number of experienced bankers are approaching retirement, leaving their jobs and taking decades of institutional knowledge with them. Third, AI and automation ARE eliminating jobs… many of which are the entry-level positions that have traditionally served as training grounds for banking’s future leaders.
Taken together, these trends create a challenge that extends well beyond human resources. They affect how banks recruit, train, develop, and retain talent, and ultimately how they compete.
Need to Know
- 50% of U.S. institutions surveyed say that “demand for specialized digital skills outpaces supply”
- Large financial institutions project that AI could eliminate roughly 200,000 roles over the next three to five years.
- While 77% of employers say they plan to reskill workers for an AI-driven future, only 57% have created meaningful programs to make that happen.
- Workforce planning is becoming as important to long-term success as capital planning and risk management.
A talent problem banks can't simply recruit their way out of
The challenge facing banks isn't just a lack of candidates. It's a competition for talent that has fundamentally changed. Technology companies and fintechs often attract skilled engineers, data scientists, and AI specialists by offering more than compensation. They offer a clear mission, faster development cycles, greater autonomy, and opportunities to work with the best in modern technologies.
Meanwhile, many banks are asking top technical talent to work within organizations that still rely on aging legacy systems and lengthy approval processes. Not surprisingly, many institutions admit they struggle to present a compelling value proposition to digital talent. The challenge is compounded by the speed at which technology evolves. Technical skills that are in high demand today may need to be refreshed or replaced within just a few years. As a result, hiring alone will not solve the problem. Banks must also invest in developing and continuously updating the skills of the people they already have.
An experience gap that’s hard to fill
While banks work to build new digital capabilities, another challenge is developing at the same time: the loss of institutional knowledge.
According to industry research from Cerulli Associates, by 2032 roughly 37% of advisors are likely to retire and more than one in four do not have a succession plan in place. But this isn't just an issue for advisors. Across the industry, experienced credit officers, compliance professionals, operations leaders, and technology specialists are approaching retirement as well.
When these employees leave, they take more than job knowledge with them. They take years of experience, judgment, and insight that can't always be found in a policy manual or training program. The result is what many describe as an "experience gap." On one side are seasoned bankers with decades of institutional knowledge. On the other are newer employees who often bring strong technical and digital skills, but have not yet had the opportunity to develop the same depth of banking experience.
The timing couldn't be more challenging. Just as banks are investing heavily in AI and automation to support lending, risk management, and operations, many of the people whose expertise shaped those processes are preparing to leave the workforce.
Financial institutions aren't struggling with implementing AI solutions because of legacy systems or a lack of funding. They're struggling because they don't have enough people with the expertise needed to build, manage, govern, and improve these systems over time.
What banks can do now
Rethink hiring
First, they can rethink how they approach hiring and workforce planning. Too often, talent strategies are built around job titles and organizational charts. Instead, institutions should focus on the skills and capabilities they'll need over the next five years, honestly assess where they stand today, and build hiring, training, and succession plans around those needs.
Transfer knowledge
Second, knowledge transfer needs to become a business priority, and treat succession planning and knowledge retention with the same level of attention they give to other critical functions. They need to be intentional about capturing and transferring knowledge before it leaves the organization. That may include phased retirement programs, formal mentorship opportunities, better documentation of decision-making processes, and knowledge-sharing systems that preserve the expertise of experienced employees for the next generation of employees.
Become a destination
Third, banks can become more attractive destinations for technical talent. Compensation matters, but it's rarely the deciding factor. Skilled technology professionals want meaningful work, opportunities to innovate, modern tools, and the ability to make an impact. Institutions that can offer those things will have a significant advantage in the competition for talent.
Redesign roles
Finally, banks can begin redesigning roles around how people and AI will work together. The most successful institutions won't be those that simply automate tasks. They'll be the ones that thoughtfully combine technology with human expertise, allowing employees to focus on the judgment, relationships, and decision-making that create real value.
In the end…
Banks that take these steps today will be better positioned to retain talent, preserve institutional knowledge, and navigate the regulatory and competitive challenges ahead. Those that view it simply as an HR responsibility may discover that even the best technology investments can't make up for a workforce strategy that was never fully developed.
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Want to learn more about what we do for bank marketers to help them succeed? You can start by visiting bankmarketingcenter.com. Then, feel free to contact me directly by phone at 678-528-6688 or via email at nreynolds@bankmarketingcenter.com. As always, I welcome your thoughts.