Digital transformation is the critical strategic initiative for financial services firms this year, but budget constraints, staff resistance and inflexible legacy systems stand in the way of success.
The Broadridge Financial Solutions, 2023 Digital Transformation and Next-Gen Tech study of 500 buyside and sellside firms globally, more than agreed that digital transformation is currently the company’s most important focus.
Firms spend 27% of their overall IT budget on participating in the digital revolution, up from just 11% last year.
But Tim Gokey, chief executive officer of Broadridge, said the digital transformation “won’t come easy” especially for incumbents with established systems and procedures.
The research finds more than 40% of respondents are held back by inflexible legacy systems, while more than a third lack funds for digital transformation.
“And economic headwinds aren’t 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,” Gokey said.
One third of respondents say they lack the requisite talent to implement digital improvements, and the same number say staff are actively resistant to change.
The research argued that established financial firms face challenges from new digitally native entrants to the market, particularly on the distribution side of financial services.
“These upstarts aren’t weighed down by legacy systems nor outdated thinking. They’re agile and tech-obsessed; to compete, incumbents must be too,” Broadridge reported.
This was evidenced by one unnamed head of data and analytics at a US full-service Institution, who said: “There are major new entrants into the financial services space from non-traditional sectors. Legacy organisations like ours have to reinvent themselves, which is incredibly time-consuming, complex, and expensive. Whereas if you’re a new entrant, you can start from scratch.”
Looking at where they plan to invest, financial services firms are prioritising AI, data analytics, and real-world applications for blockchain and distributed ledger technology.
Four-fifths of firms say the industry “will have modernised its tech stack before we land a human on Mars”; a major technology feat currently estimated to happen by the early 2030s.
There is also interest in nascent technologies from firms classified as ‘leaders’ – those with innovation culture and advanced use of emerging technologies – that plan to increase investment in quantum computing by 16% on average over the next two years.
However, firms are only increasing investments in the metaverse by 5% on average, indicating more a wait and see approach before committing funds.
©Markets Media Europe 2023
