Financial institutions are increasingly embracing a ‘digital revolution’, according to analysis by global fintech group Broadridge.
The report, Digital Transformation Enters a New Phase – Here’s What Comes Next, found more than half of participants saying digital transformation was the most-important strategic initiative for their company, with almost three-quarters (71%) suggesting AI had changed how they work.
In addition, four-fifths (80%) of respondents thought the industry would modernise its tech stack within a decade – and quicker than it would take to land a human being on the planet Mars.
Writing for IBS Intelligence, Mike Sleightholme, president of Broadridge International, noted: “Speeding up the time it takes to bring new products to market is a priority for European firms and ranks as the third biggest driver for investments. This agility allows firms to take advantage of short-lived opportunities to gain market share in new asset classes or client segments as the pace of change accelerates.”
Inflexible legacy systems
Nevertheless, the report does foresee blockages and hurdles, with the authors warning: “Reinvention for a digital world will not come easy – especially for incumbents with established systems and procedures. More than 40% of respondents say they are still held back by inflexible legacy systems.
“More than a third of firms lack funds for digital transformation – and economic headwinds are not helping. The same percentage struggle to balance innovation with day-to-day tasks. This is driven in part by a shortage of the talent and skills needed to advance.”
Broadridge also found two-fifths (39%) of respondents agreeing the metaverse would become a key channel for client interaction in the next decade. Despite this, firms are only increasing investment by 5% on average over the next two years.
The report’s authors wrote: “Other nascent technologies, such as quantum computing, could create even greater disruption for the industry in the future. Quantum computing offers the potential to process complex computations millions of times faster than today’s most sophisticated supercomputer.”
They added: “These tools, in tandem with edge computing, the cloud and AI, offer the ability to harvest data at scale, and analyse it much more rapidly to make more accurate predictions and solve complex optimisation problems.”
Broadridge went on to identify “a chasm” between what it called “digital natives” and “traditional firms” on whether digital transformation was the most-important strategic initiative. An affirmative answer was given by 78% of the former, but only 51% of the latter.
The digital natives are “more advanced at deploying AI, blockchain, cloud computing and other emerging technologies,” Broadridge observed, continuing: “They are also more likely to make big investments in data analysis and visualisation tools (66%) and AI (46%) during the next two years. Incumbents need to deal with legacy IT systems while digital natives need to focus on prioritising innovation, enhancing the customer experience and automating workflows.”
For its report, Broadridge said it had surveyed 500 C-level executives and direct reports across the buy side and sell side from 18 countries to understand where they stand today and what they expect this year and beyond.