As the digital revolution accelerates, financial institutions are racing to create enterprise value by investing heavily through the economic cycle, according to a new study by Broadridge Financial Solutions. The study found that 75% of executives are confident in their tech transformation roadmap, but a divide is growing between leaders and non-leaders.
While more than two-thirds say they have made meaningful progress in modernizing their core IT platforms, organizations must innovate along multiple tech frontiers as they grapple with new technologies like generative artificial intelligence (GenAI), rising cybersecurity challenges, and accelerating needs for seamless digital customer experiences.
When it comes to infrastructure, more than 80% of all executives indicate that they are making the biggest day-to-day investments in building an advanced IT cloud platform. In a media briefing, it was noted that focus is on the “big things” and “getting the infrastructure right”, particularly in the area of data management with a focus on lineage and governance.
The majority also expect to maintain or increase their investment in next-gen technologies, with AI and blockchain significantly leading, followed by RPA and digital identity.
“We are seeing significant momentum across financial services as firms leverage new technologies like GenAI to solve their most pressing business challenges, while also gaining measurable value from more established forms of AI, blockchain, cloud and core infrastructure technologies,” said Chris Perry, president of Broadridge, in a statement. “As many firms are beginning to reap the benefits of having a sound tech investment strategy, it’s clear they must also focus on implementing a digital skills and talent strategy to foster an advanced innovation culture that will enable them to remain competitive and ahead of the pack.”
Cyber risks a top agenda item as well as obstacle to digital transformation
Over the next two years, financial institutions plan to boost their investments in cybersecurity by 28% on average; impacting their internal security protocols, but also how they engage with third-party technology vendors. According to the study, cybersecurity is the top capability executives say they expect from their technology vendors, outpacing their ability to deliver projects on time and on budget and building next-generation technologies into their solutions.
Executives also cited cybersecurity risks as the top challenge currently inhibiting the pace of digital transformation at their company.
Tech executives, who often understand the risks of an insecure environment more than other senior leaders, tend to care more about cybersecurity than business executives.
Leaders vs. non-leaders widening gap
The 2024 Digital Transformation and Next-Gen Tech Study gauges the perspectives of 500 global C-suite and senior executives across the buy side and sell side on the forces driving the industry’s technology modernization. The study categorized firms as digital “leaders” versus “non-leaders,” based on their advancement levels across ten essential aspects of digital transformation, including modernized core IT, the use of automation tools, innovation culture, data management, and digital customer experiences, among others.
Leaders tend to be larger organizations, often universal banks with multiple divisions and access to big volumes of data. A limited number of small and mid-sized firms were represented as leaders, and more leaders emerged in the US than in the EMEA and APAC regions.
While 75% of of C-suite executives and senior leaders reported confidence on their transformation roadmap, a little more than two-thirds said they have made meaningful progress in modernizing their core IT platforms. These leaders are capturing a significant technological dividend, the report noted. It was also highlighted that 44% of leaders are making moderate to large investment in GenAI, more than twice the level of non-leaders.
“We saw that a profound gap has opened up between leaders and non-leaders,” according to the study. “Companies that have invested big in digital transformation — and built the innovation cultures and talent capabilities critical to fostering growth — are now pulling ahead of firms that will need to play catch-up to stay competitive.”