Tracking the accelerating technology transformation

By Samir Pandiri, president, Broadridge International

5 August 2020

It’s rapidly become a platitude that financial services will look utterly different post-crisis.   At Broadridge we wanted to understand in more detail the views of financial services leaders at this juncture. We surveyed c-suite executives and their direct reports from 500 financial institutions globally, with fieldwork completed by the beginning of June. The survey responses include executives from buy-side and sell-side firms, including universal banks (20 percent), commercial or investment banks (16 percent), broker-dealers (14 percent), investment/asset managers (15 percent), insurance companies (13 percent), hedge funds (11 percent) and wealth managers (11 percent). The sample was split equally across the APAC, EMEA and North American regions.

Here’s what we found.

Overall, 38 percent of financial services executives expect the recovery for their firms from the impact of COVID-19 to take one-to-two years.  But there are striking differences by region.  EMEA and APAC executives are most bullish: 23 percent and 22 percent of these respectively expect their firms to recover within six months, compared with just 12 percent of North American respondents.

Virtually all financial services companies expect the pandemic to affect their operating model and strategy in relation to next-generation technology. More than half of companies plan to accelerate implementation of their next generation technology strategies, with immediate priorities for the next six months including:
 
  • Increasing cybersecurity and risk management (63 percent)
  • Enhancing multi-channel client communications (60 percent)
  • Improving customer engagement and experience (53 percent)
  • Making significant cost reductions (45 percent) – although this subsides to 20 percent in the longer term

The previous investment areas that were seen as most beneficial in managing the pandemic were interactive digital technologies (72 percent) – defined as digitising customer and employee experiences, workflows and operations - along with cloud technologies (59 percent).

As a result of the pandemic, many firms have also reprioritised their longer-term investment strategies. The challenges of adapting to the new normal, are driving firms into a further acceleration of their digital transformation:
 
  • 58 percent plan to increase investment in interactive digital technologies
  • 54 percent plan to increase investment in artificial intelligence (AI)
  • 49 percent plan to improve their ability to quickly gather and analyse data moving forward

Considerable differences however exist between regions around progress towards digital transformation. When asked if their digital transformation was at either a planning stage, an early stage, amid stage or an advanced stage, 26 percent in EMEA said they were at early stage, compared to just 15 percent of US firms. (19 percent of APAC firms were at an early stage, and a further five percent just at the planning stage).

On AI strategies, there was relatively little difference between regions, with 44 percent of US firms at a mid or advanced stage, compared to 38 percent of EMEA firms and 43 percent of APAC firms.

Around use of the cloud, regional variations were larger. 42 percent of US firms say they are at an advanced stage in their adoption strategies for cloud, compared to only 28 percent of EMEA firms. (40 percent of APAC firms).

Similarly, there were noticeable differences in attitudes to the blockchain and DLT. 48 percent of EMEA firms are not considering using the blockchain, compared to just 31 percent of US firms and 40 percent of APAC firms. In terms of blockchain strategies, 15 percent of US firms are at a mid-stage and two percent at an advanced stage, compared with seven percent of EMEA firms at a mid-stage and two percent at an advanced stage.

The pandemic has also changed the role of fintech providers, with 70 percent of respondents stating that fintech providers' ability to offer innovative uses of next-generation technology has become more important. Almost half of respondents agree that the pandemic increased the need to mutualise – in other words, share or outsource – processing functions to reduce costs and increase resiliency. Commercial and investment banks and broker-dealers agreed most strongly (54 percent and 49 percent, respectively).  Sell-side companies believe this more strongly than buy-side companies (49 percent and 42 percent, respectively). Hedge funds, which are typically much smaller organisations than large banks or asset managers, were least likely to agree (36 percent).

The survey captured a moment in time, in the midst of the pandemic, and interpreting the results needs care, contributing as part of an ongoing dialogue with the financial services industry. That’s critical for us at Broadridge, because leveraging next-gen technologies is core to our investment in what we call The ABCDs of Innovation, in other words AI, blockchain, the cloud and digital. Our role is helping clients understand and apply these technologies by simplifying the complex.

We do draw some relatively firm conclusions from the survey.

Overall, financial services players showed an ability to adapt during the pandemic, with previous investments in digital, cloud, and mutualised technologies demonstrating their worth as they enabled companies to be more resilient. 

Secondly, the pace of digital transformation is accelerating everywhere, and across all segments of financial services.  Firms want to drive digitisation and mutualisation much more fundamentally, to improve client experience, resiliency, and cost. 

Thirdly, there are somewhat different perspectives in the main business regions. Even in a heavily internationalised industry like financial services, that’s nothing new. European financial services leaders seem more positive about the speed of recovery – let’s hope they’re right. They are also more cautious about the cloud and particularly about blockchain. Forward thinking service providers to financial services need to pay attention to those nuances, while remembering that there is a powerful common direction of travel.

Rarely has good current information from c-suite executives been so essential.  We’ll keep listening intelligently to understand the industry’s future needs as firms adapt and evolve in response to the new normal. 
 

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