Fintech
How US Fintech Firms Are Tackling Compensation
Given the global rush to digital transformation and the desire across every industry to have a strong technology presence, fintech has certainly not been immune to the competition for talent. This makes it important for fintech organizations to review their talent and rewards strategies relative to the broader tech and finance markets.
Fintech Payment Practices
Last year, fintech organizations continued to increase their salary budgets despite ongoing economic volatility and geopolitical uncertainty. This was expected to continue this year, driven by the recognition that salaries are critical to attracting and retaining top talent (Figure 1).
In the United States, fintech jobs that received the highest average base salary last year included:
- Product development
- User Experience Design
- IT Architecture
- Database design and analysis
- Project/Program Management
These high base salaries were seen across both the professional and executive career ladders, according to data from our 2023 WTW Fintech Compensation Survey – USA. This indicates the strong demand for talent in these fields. U.S. fintech executives also received pay raises that outpaced the inflation rate of 3.4% (Figure 2).
We expect employers to be more cautious in how they allocate payroll budgets this year. This is due to the need to balance compensation expenses with overall financial sustainability.
Examining the competitiveness of financial technology in the United States
To determine the competitiveness of the fintech market, we looked at similar industries, including technology, media and gaming (TMG) and financial services (FS), and compared base salary, total compensation, and bonus opportunities.
The median annual base salary in the US fintech sector for middle managers, senior managers, and executive-level employees tends to be lower than FS. However, fintech beats TMG for annual base salary in middle and senior management roles (Figure 3).
Total direct compensation (TDC) in fintech is also lower than that of financial executives at all levels of the survey and exceeds TMG for middle and senior management groups (Figure 5).
Figures 3 and 4 indicate that the US fintech industry is not as competitive as FS; rather, fintech focuses on competitive compensation for middle and senior management roles. However, it is also important to examine annual bonus practices and long-term incentives (LTI) in the industry to gain a complete picture of fintech’s current total reward strategy.
Average bonuses in the US
Our analysis of bonus payouts in fintech revealed some interesting trends. Executives and managers consistently exceeded their bonus opportunities, with average bonus payouts above target. Payouts (calculated as actual/target bonus) ranged from 1% to 8% above target for middle management and from 6% to 18% above target for executives.
In contrast, individual contributors generally missed their bonus opportunities. Although their payments were substantial, they fell short of target. Their payments ranged from 10% below target (mostly junior roles) to 4% below target (specialist levels). This suggests there may be room for improvement in goal setting and performance management, or in providing additional support to help individual contributors reach their full potential.
Several factors, both internal and external, are influencing these trends. Within organizations, different roles and tiers are measured by different metrics. Externally, market conditions, market competition, and regulatory changes can impact overall company performance and, in turn, bonus payouts.
LTI in the US Fintech Sector
In terms of long-term incentives, fintech firms outperform financial firms in C-suite and management positions, suggesting that fintech firms are strategically using long-term incentives to retain key talent and create a long-term focus on the business.
Fintech also outperforms TMG in offering LTI to middle management. However, for more senior and executive roles, TMG outperforms both Fintech and FS (Figure 5).
Message to Fintech Organizations: Leverage Your Assets
While fintech organizations may be more cautious about increasing salaries in 2024, there are areas beyond base pay that can be leveraged competitively. By strengthening annual bonus and LTI opportunities, fintech organizations can improve their total rewards strategy to attract and retain talent. Additionally, these measures will help motivate and retain employees long-term.
To maximize these efforts, fintech organizations need market data that reflects their talent gaps and potential career paths. By taking these actions, fintech organizations can create a total rewards strategy that targets the critical skills their business needs and acquires the talent that will help them achieve long-term goals.