In 2024, some major banks plan to hire more mid-career professionals than new graduates for the first time, reflecting challenges in adapting to today’s rapidly changing technological and competitive landscape. With fintech and other new initiatives on the rise, existing employees’ skills are often insufficient to meet these needs. In this article, Makoto Shibata, Head of FINOLAB, discusses changes in the financial labor market and the growing skill gap in financial institutions.

Written by: Makoto Shibata, Head of FINOLAB

What does the increase in mid-career hiring by financial institutions mean? A detailed explanation will follow later.

Table of Contents:

1. The Decline in Popularity Behind the Surge in Mid-Career Hiring
2. Four Reasons Young Employees in Financial Institutions Decide to Resign
3. The Reasons for Increased Employee Turnover
4. A Persistent Shortage of “Next-Generation” Bank Employees with Skills
5. Five Essential Skills Needed for Future Financial Workers
6. The Current Situation of the “Skill Gap” in Japan’s Financial Industry
7. Conclusion: How Can Financial Institutions Secure New Talent?

The Decline in Popularity Behind the Surge in Mid-Career Hiring

According to Nikkei, Mitsubishi UFJ Bank plans to increase mid-career hires from 347 in 2023 to 600 in 2024, while new graduate hires from 354 to 400. This marks the first time mid-career hires will exceed new graduates.

Across major banks, mid-career hires are approaching 50% of total hires, signaling a shift from the traditional model where employees were hired as new graduates and trained through experience in various departments.

This shift stems from the declining popularity of banks as desirable employers, leading to a drop in new graduate hires. According to a 2024 employment survey by HR Research Institute and Rakuten Minshu, major banks and trust banks, once consistently in the top three industries for job seekers, have now fallen to 9th place among humanities students and out of the top 10 for science students.

Top 10 Most Desired Industries
(Source: HR Research Institute × Rakuten Minshu: 2024 Graduate Employment Survey)

Four Reasons Young Employees in Financial Institutions Decide to Resign

The resignation rate among young employees in financial institutions has been rising, with many leaving within a few years of being hired. This is making it increasingly difficult to manage workforce planning based solely on new graduates. According to an October 2024 report from the Ministry of Health, Labour, and Welfare, 26.3% of university graduates hired in 2020 for financial and insurance sectors resigned within three years.

Resignation Rates Within Three Years by Industry
(Source: Ministry of Health, Labor, and Welfare “Resignation Rates for New Graduates (March 2020 Graduates)”)

Here are four main reasons cited for the high resignation rate:

Tough Sales Quotas
Employees are often pressured to push products such as investment trusts or loans that offer little benefit to customers. Additionally, when banks decide to halt loans, even when the customer’s business is progressing, employees experience internal conflict as they have to prioritize the bank’s interests over the client’s.

Conservative Culture
Many financial institutions still adhere to rigid, traditional rules and ideas from superiors, limiting flexibility in the workplace. There is a prevailing fear of unreasonable job transfers, especially to regional offices, which are often viewed as demotions. Experiencing such transfers is seen as veering off the standard promotion track in the banking sector.

Dissatisfaction with Career Advancement
Career growth in banks tends to emphasize hierarchical promotions and seniority, leaving less room for personal growth in terms of job content. Employees express frustration when, despite their hard work, evaluations are attributed to their supervisors, making it unclear how to advance or improve one’s role.

Dissatisfaction with Working Conditions
Although senior positions at major banks may eventually offer salaries exceeding 10 million yen by the time employees reach their 30s, the starting salary is not particularly high. Many young employees are unable to endure the initial years and seek better conditions elsewhere. Furthermore, younger employees are less likely to tolerate long hours and low compensation, as they no longer see delayed rewards as sufficient motivation.

The Reasons for Increased Employee Turnover

According to a survey conducted by the Japan Management Association in 2023, approximately 30% of new employees express a desire to change jobs or pursue independent careers right from the start of their employment. This shift in mindset reflects changing attitudes towards job transitions and career paths.

As a result, companies are now able to recruit a broader range of candidates for mid-career positions compared to previous years.　

“30% of new employees express a desire to change jobs or pursue independent careers right from the start.”
(Source: Japan Management Association, “2023 New Employee Awareness Survey”)

A Persistent Shortage of “Next-Generation” Bank Employees with Skills

The changes in labor market conditions mentioned earlier suggest that simply hiring mid-career professionals to replace those who leave may not suffice. The fundamental issue lies in the fact that technological advancements and changes in the competitive environment are making existing employees’ skills inadequate for new business demands.

In mid-career hiring, there is fierce competition for specialists broadly referred to as “digital talent,” including roles like data analysts, application developers, and UI/UX designers.

However, the definitions of these new job roles often remain ambiguous. Consequently, many organizations struggle to analyze the skills gap between what is needed in new business areas and the skills of their existing workforce. This ambiguity makes it unclear what specific skills are being sought in mid-career hires.

Although there has been an increase in independent hiring within digital departments, driven by the limitations of HR departments traditionally focused on generalist recruitment, many organizations still lack established hiring expertise in these new areas.

Five Essential Skills Needed for Future Financial Workers

In international markets, particularly in regions where fintech expertise is rapidly growing, there has been an increased focus on analyzing these skill gaps. One notable approach is the framework developed by the UK-based CFTE (Centre for Finance, Technology and Entrepreneurship), a pioneer in offering structured online courses in the fintech sector.

Drawing from insights in their “The Fintech Job Report 2022,” CFTE emphasized the need for financial institutions to consider skills essential not only in traditional finance but also in IT-driven roles. This led to the creation of the “SHIME” framework, which outlines core skills necessary in the fintech space.　

The SHIME Skills Framework:
(Source: The SHIME Skills Framework)

The major skill components that make up the “SHIME” fintech skills framework are as follows:

Soft Skills: These include abilities necessary to bridge business development, partnerships, system utilization, and project organization. Such skills are often challenging to acquire within traditional organizational structures or workflows.

Hard Skills: This refers to technical expertise such as software development, platform building, system operation, and cybersecurity. While IT professionals possess these skills, they are often limited within financial institutions.

Industry Knowledge: This covers an understanding of how financial services have evolved with technology, recognizing the key challenges in various sectors, and staying informed on applicable regulations.

Mindsets: In a traditionally conservative, risk-averse financial industry, fostering a mindset open to innovation is essential. While widely acknowledged, it often requires a significant shift in employee attitudes.

Experience: Practical experience is crucial for advancing fintech projects. Specifically, those involved in system development or operations must be able to convey business requirements based on real-world knowledge and experience.

The Current Situation of the “Skill Gap” in Japan’s Financial Industry

At the Japan FinTech Festival 2024 held on March 6, a panel discussion moderated by CFTE and the author addressed the topic of “Developing Talent & Building Capacity to Fill the Talent Gap.” The conversation highlighted Japan’s financial industry’s challenges in defining “digital talent.”

Roundtable “Developing talent & building capacity to fill the talent gap” (2024-03-06)

The discussion pointed out that while recruitment often emphasizes hard skills (such as technical abilities), the greatest shortage lies in soft skills—those necessary for effective communication, collaboration, and business development. The need for bilingual communication was also raised as a key factor for foreign fintech companies entering the Japanese market, where securing proficient country managers who can navigate both languages is critical.

Industry knowledge and work experience are easier to assess through resumes, but evaluating a candidate’s mindset—or their openness to innovation and adaptability—is more challenging and often only becomes apparent after they begin working.

Conclusion: How Can Financial Institutions Secure New Talent?

To secure talent for fintech projects and digital transformation, financial institutions are finding that relying solely on internal talent development has its limits. This has led to an increased focus on mid-career hiring as a necessary strategy in the current environment.

In the mid-to-long term, institutions are exploring new initiatives, such as assigning employees to fintech firms or non-financial sectors to develop soft skills. These efforts include secondments to investment departments or innovation subsidiaries, often in a part-time capacity.

In the short term, however, expanding mid-career hiring is crucial. To succeed, institutions must move away from traditional generalist recruitment and clarify the specific skills that are truly in shortage. Moreover, the recent implementation of generative AI is expected to affect staffing needs across all sectors, from customer service to system development. As a result, recruitment and talent development strategies need to account for the rapidly changing skill gaps within organizations.