Banks don't have a labour problem. They have a labour allocation problem.
The third workforce: why financial firms are rethinking who does the work.
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Financial firms have always bought some of their labour from outside the business. What's changing is the shape of that choice. For decades it meant employees or consultancies; a third option — independent professionals engaged directly, for a defined problem — is turning into a strategic lever, not just a cheaper form of temporary staff.
Personnel costs: the fixed-cost problem
European banks remain profitable, but their cost base sits under near-constant scrutiny. EU and EEA banks reported a weighted average cost-to-income ratio of 53.0% in the first quarter of 2026, according to the European Banking Authority — a level that has held broadly stable over the past few years. The EBA has also flagged that banks' own forecasts for improving profitability lean partly on an expected decline in staff and other administrative expenses, an assumption it calls rather optimistic.
Permanent employees bring institutional knowledge, accountability and control, but fixed capacity is expensive once demand shifts. Large consulting firms bring breadth, method and specialist skill, but can be an expensive way to solve a problem that really needs a handful of experienced people for a few months. Neither model fits a firm that needs a specific capability for six months, not six years.
Non-personnel costs: the technology and outsourcing problem
Technology poses a different version of the same dilemma. In 2023, significant euro-area banks spent an average of €83.9 million each on outsourced ICT services — up 2.1% on the year before — according to the European Central Bank, still the most recent figure it has published on this measure. ICT accounted for 47% of their total outsourcing budgets, payment services another 10%, and cash management 8%. Separately, the EBA has warned that ICT-related costs may not fall even as banks try to bring overall costs down, given the scale of ongoing technology investment.
Regulation adds a layer of its own. The Digital Operational Resilience Act, applicable across the EU since 17 January 2025, has sharpened supervisory scrutiny of banks' reliance on third-party technology providers. The ECB has pointed to weaknesses in how banks manage that dependency — including the need to understand it beyond the immediate supplier.
Fintechs live a different version of the same two-sided problem. A young payments company may not need permanent specialists in compliance, cyber security, data architecture or regulatory change — that's the personnel-cost argument for staying lean. But relying entirely on vendors or large consultancies can leave it short of expertise exactly when that capability turns strategic, and exposed to the same third-party dependency regulators are now watching. That's the non-personnel-cost argument for bringing some of it in-house.
Where independent consultants earn their place
The best independents aren't simply temporary staff. They carry experience built across several institutions and can be deployed against a defined problem, typically for months rather than years. A bank modernising a payments platform, an insurer implementing new regulation, or a fintech building its risk framework may need exactly that mix of expertise and flexibility.
The pool is already sizeable: Britain had approximately 2.05 million freelancers in 2025, according to IPSE, the Association of Independent Professionals and the Self-Employed — broadly stable since 2023, which suggests freelancing has settled into a durable feature of the UK labour market rather than a temporary reaction to economic disruption.
None of this is frictionless. Procurement systems are generally built around employees and large suppliers, not individuals. Security and regulatory checks can make onboarding slow. Tax rules complicate the economics of contracting. And the firm remains responsible for work done by people outside its payroll. Independence can't be sold on day rate alone.
The turn: a portfolio, not a hierarchy
A financial institution can keep strategic knowledge and decision-making inside the firm, use large providers where scale and industrialised process genuinely matter, and bring in independent specialists when scarce expertise is needed for a defined period. What results looks less like a hierarchy and more like a portfolio.
That's why independent consultants shouldn't be treated as just another form of contingent labour. They sit in a distinct space between employee and consulting firm: independent enough to flex, experienced enough to solve a specialist problem, embedded enough to leave the knowledge behind when they go.
For a firm under simultaneous pressure to cut cost, modernise technology and satisfy regulators, that middle ground is getting harder to ignore. The real question isn't whether work should sit inside or outside the firm. It's which capabilities should be owned, which should be industrialised, and which are best supplied by a specialist who can walk in, solve the problem, and walk out.
Aulay's view — and what to do about it
At Aulay, we treat this as a design question, not a procurement afterthought: which capabilities a firm should own outright, which it should buy at scale from a large provider, and which it should bring in through an independent specialist — plus the operating model, governance and procurement mechanics that make that third option actually work inside a regulated firm. If your organisation is finding that its procurement and onboarding processes weren't built for individuals, or simply hasn't worked out where that line sits, get in touch with Aulay to talk through what a labour-allocation review would look like against your own cost base.
References
1. European Banking Authority, “Risk Dashboard,” Q1 2026 (published June 2026), p. 13. Supports the 53.0% weighted average cost-to-income ratio for EU/EEA banks.
2. European Banking Authority, “Risk Assessment Report,” June 2026, p. 5. Supports the statement that banks’ profitability forecasts rely on an assumed decline in staff and administrative expenses — which the EBA calls a rather optimistic assumption — and that ICT-related costs may not retreat given ongoing investment needs.
3. European Central Bank Banking Supervision, “Outsourcing trends in the banking sector,” Supervision Newsletter, 19 February 2025, section “Outsourcing trends in the banking sector.” Supports the €83.9 million average ICT outsourcing spend per significant institution in 2023, the 2.1% year-on-year increase, and the 47% / 10% / 8% shares of outsourcing budgets for ICT, payment services and cash management respectively. This remains the most recent figure the ECB has published on this measure.
4. Regulation (EU) 2022/2554 of the European Parliament and of the Council on digital operational resilience for the financial sector (DORA), Official Journal of the European Union, L 333, 27.12.2022, Article 64. Sets the regulation’s date of application as 17 January 2025.
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022R2554
5. Association of Independent Professionals and the Self-Employed (IPSE), “How many freelancers are in the UK?,” 2025, section “How many freelancers are in the UK?” Supports the estimate of approximately 2.05 million freelancers in Britain in 2025, broadly stable (+1%) on IPSE’s 2023 figure.
https://www.ipse.co.uk/articles/how-many-freelancers-are-in-the-uk
Frequently asked questions
- What does “labour allocation” mean in banking?
- It's the decision of which capabilities a firm keeps as permanent staff, which it buys from a large consultancy or technology vendor, and which it sources from an independent consultant for a defined period.
- Why are independent consultants gaining ground on traditional consultancies?
- They combine the flexibility of contingent labour with experience built across multiple institutions, which lets a firm bring in a specific capability for months rather than years, typically at a lower cost than a large consulting engagement.
- Does using independent consultants create additional regulatory risk?
- It can, if oversight is weak. Under DORA and current ECB supervisory expectations, banks are expected to understand and monitor dependency on any external party carrying out important functions — not only large outsourced technology vendors.