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Compensation trends spotlight: Fintech

Evolving in a uncertain environment continues

By James Walsh | December 22, 2020

2020 has been mixed for the fintech industry, some organizations were able to operate at full capacity whilst others struggled
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Fintech industry sectors

The industry generally incorporates a broad range of organizations including pure fintechs (also known as ‘born as fintechs’), innovation hubs in large and traditional Financial Services organizations, technology companies providing Financial Services and products and traditional Financial Services organizations that provide their products and services through technology.

COVID-19 significantly impacted how people work, where they work and what they value. For the fintech industry, some organizations were able to operate at full capacity and continue raising funds to support their growth journey, while others struggled – and continue to struggle. Cuts and caution in private funding meant some fintech organizations had to consider taking pay-related actions, such as salary reductions or innovative pay and shares schemes – to keep a sustainable cash flow.

Based on our 2020 compensation surveys and industry research, we observed a few key trends in 2020 for the Fintech industry.

In line with other industries, budgets for salary increase decreased slightly in 2020 compared to 2019 in the Fintech sector. For 2021, Fintechs project a similar scenario with adjusted increases across all levels.

Actual bonus payouts are slightly above targets for senior levels, but most organizations will continue focusing on allocating bonus pools across all roles according to performance.

Long-term incentives (LTI) for Fintech continue to be highly competitive when compared to all other industries across all markets.

Compensation trends in the Fintech industry

Base salary movements

There was a slight decrease in the year-over-year salary increase rate from 2019 to 2020. With executive pay freezes and reductions, the pool for salary increases was allocated mainly to professional, business and technical support roles. Projected salary increases for 2021 appear consistent with other industries. Most fintech organizations remain optimistic for the new year and are expecting to conduct a regular salary review. We are expecting to see further adjustments compared to previous years for most fintechs.

To manage labor costs, many fintech organizations chose to reduce or freeze hiring rather than take pay-related actions (Figure 1). Only 16% of fintechs had frozen salaries. Only 8% have reduced salaries, and most of these reductions have been applied at founder/board and/or executive levels only.

Only 11% reduced or delayed merit increases and another 6% plan to do the same. The timing of the pandemic response may have played a role in this decision, as many organizations may have already allocated their merit increases in the first half of 2020.

Other actions taken or being considered include reducing annual bonus accruals and adjusting pay at risk (given employees had the opportunity to earn a backpay reduction amount linked to company performance). Overall, fintechs took actions that are broadly aligned to those taken by financial services organizations, although a slightly larger percentage of fintech organizations were quicker to act compared to the financial services sector.

Industry hot jobs

Our survey data shows a greater than average increase in market demand for jobs clustered in these main functions: IT development (including cloud, cybersecurity and user interface design), technology project and product management, data engineering and sales technical support.

Figure 2 shows the roles that are receiving the highest pay (Actual Total Direct Compensation – Base Pay, plus Annual Bonus, plus Long-Term Incentives) at the professional career level (P3) in major markets. While technology roles are the most in-demand, there are certain non-technology roles that have become hot jobs as well such as treasury, strategic alliances, customer support, compliance and investment management.

Figure 2 – Hot jobs in selected major markets
Country Job Title Highest Paid
Brazil Cloud Computing Engineering 1
Brazil Data Engineering 2
Brazil IS and Cybersecurity 3
Brazil Pre-sales Technical Support 4
China Treasury 1
China Investment Portfolio Management 2
China Artificial Intelligence (AI) Applications 3
China Technology Project Management 4
United Kingdom Strategic Alliances 1
United Kingdom User Interface Design 2
United Kingdom Pre-sales Technical Support 3
United Kingdom Back-End Development 4
United States of America Application Development 1
United States of America Information Technology Project Management 2
United States of America Product Management 3
United States of America Data Engineering 4

Bonus payout and short-term incentives

Actual bonus payouts are trending close to or just above targets in 2020 (Figure 3) for executive and management roles. A small percentage of organizations are offsetting the financial impact of COVID-related disruptions by restructuring their total compensation program for executives, such as delaying goal setting for annual incentive plans. This is in line with the approach taken by the broader financial services industry in 2020.

Moving into 2021, it would benefit fintech organizations to stay cautious of persisting market forces that could affect the global economy, including the pandemic and geo-political shifts, as these may have a downward effect on bonuses next year for all industries.

Long-term incentives (LTI)

Long-term incentives and equity in fintech have always played an important role in the pay mix, not only for executives and senior managers, but across all levels in fintech organizations. It is seen in the industry as a driver for employee engagement. A shared long-term vision between leaders and the rest of the employees, managed with flexibility to accommodate a wide spectrum of employees with different interests and needs, is a very attractive proposition for both employees and the business.

Across all markets in the fintech industry, we see highly competitive LTI grants across all levels, as well as higher rates of eligibility and receivership when compared to the financial services industry (Figure 4). Fintech is still behind the broader High Tech sector when it comes to eligibility, so it will be interesting to see if this gap closes in the coming years.

The pandemic’s unprecedented impact on employee wellbeing and business created a continuously evolving and uncertain environment for the fintech industry, forcing organizations to reevaluate their rewards priorities. As such, access to an array of high-quality compensation market data and insights to support decision-making has been critical in helping organizations creatively address compensation and benefits issues. Our Fintech Compensation surveys, as well as the broad Financial Services and High Tech sector surveys, offer timely and lasting support.

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