More than half of financial services executives in a new study from Broadridge Financial Solutions agree that digital transformation is currently the most important strategic initiative for their organization. In 2023, firms spend around 27% of their overall IT budget on digitalization, up from 11% last year.
Seventy-one percent of executives say artificial intelligence has significantly changed the way they work. Firms can expect more change as AI’s capabilities expand.
Established financial firms face challenges from new entrants to the market — online banks, brokers, robo-advisors and digital wealth management firms — particularly on the distribution side of financial services. These digital native upstarts are not weighed down by legacy systems or outdated thinking; they are agile and tech-obsessed. To compete, incumbents must be, too.
“Many are aware of the need to reinvent themselves — and quickly — to meet these opportunities and threats,” the study noted.
In its study of 500 C-level executives and direct reports in 19 countries, Broadridge categorized firms as “leaders” or “non-leaders” based on how advanced they are in the most essential aspects of digital transformation: innovation culture, use of emerging technologies, modern IT infrastructure, seamless customer experience, internal skill-building and adoption of security and privacy protocols.
Waving the Magic Wand
In order to fully integrate AI, most firms are overhauling internal systems and processes for managing data, the study noted. But only 19% of firms surveyed have reached an advanced stage of developing an integrated data platform across their business departments.
Given that slow progress, Broadridge asked executives what they would change if they could wave a magic wand to accelerate transformation.
Leaders said they would dramatically expand the use of AI across the enterprise. They would gather, integrate and provide access to all enterprise data across the firm. And they would be able to anticipate customer needs in five years’ time.
For all others, the top choice is replacing legacy systems with modern cloud platforms, an indication, Broadridge noted, of the gap in progress between the firms leading the way and those lagging behind.
Leaders and non-leaders were also asked where they see greater challenges. For leaders, by far the biggest is balancing innovation with daily business. They also cite inconsistent data and access, managing digital talent shortages and managing multiple service providers.
Inflexible legacy systems and insufficient budgets are the biggest challenges for non-leaders. Overall, 40% of respondents felt “held back” by legacy systems, and a third lack sufficient funding to drive transportation.
Staff resistance to constant change and digital talent shortages are also encumbrances for non-leaders.
Driving Transformation Forward
The study uncovered some practical steps that leading firms take to accelerate transformation with AI and other technologies. First, they need to establish a clear vision and understanding among business leadership and technology leaders throughout the firm.
At the same time, they must create an environment that cultivates innovation. Leaders of digital transformation have established cultures that encourage experimentation.
Finally, the top firms drive transformation by collaborating with the best partners in tech and fintech.
Link: https://www.thinkadvisor.com/2023/03/24/how-financial-firms-can-become-leaders-in-digital-transformation/
Source: https://www.thinkadvisor.com
