According to a new report from Broadridge Financial Solutions, Inc., most financial services firms now consider digital transformation critical to their business and are already looking to the next wave of technology to help them succeed.
In a 2023 digital transformation and next-generation technology study of 500 C-suite executives and their direct reports on the global buy-side and sell-side, 71% said artificial intelligence (AI) is now significantly changing their jobs way, 60% agreed that within a decade, blockchain and distributed ledger technology (DLT) will be at the heart of financial market infrastructure.
Despite a more challenging economic environment, businesses are also accelerating funding for digital transformation initiatives as they anticipate further widespread adoption of more powerful new technologies. Companies are now spending 27 percent of their total IT budgets on digital transformation—an increase of 16 percentage points compared to the 2022 study.
A new chapter of digital transformation is emerging.
In our work with clients in the financial services industry, we have seen leading companies already benefit from digitization and the use of technologies such as artificial intelligence and blockchain/distributed ledger technology as they adapt to economic headwinds and new competition dynamic.
Companies are now looking ahead to what their customers will want five to ten years from now, and how technology can help them realize that vision.
The study categorizes companies as digital “Leaders” and “Non-Leaders” based on how advanced they are in the 10 most important aspects of digital transformation. These aspects include their culture of innovation, use of emerging technologies, seamless customer experience (CX), internal skills development, and adoption of security and privacy protocols.
Digital Transformation Goes Mainstream
Adapting to the digital world and embracing the potential of new technologies is now the foundation of an organization's core business strategy, with more than half of digital leaders (53%) citing higher revenue growth as one of the most important benefits of digital transformation.
Investments in next-generation technologies are now considered critical to preparing for the future. 57% of companies believe that falling behind in digital transformation will hurt their ability to attract and retain talent, further hampering their ability to unlock new innovative tools and platforms.
The Technology Landscape in 2030
Significant advances in artificial intelligence, data analytics, and real-world applications of blockchain and distributed ledger technology are fueling momentum and optimism among leading financial institutions. In fact, 80% of survey respondents said the industry will modernize its technology stack before we send humans to Mars, a major technological feat currently estimated to be achieved in the early 2030s.
Respondents also expect significant advances in more emerging technologies. Companies listed as leaders plan to increase their investment in quantum computing by an average of 16% over the next 2 years; however, companies are only increasing their investment in the Metaverse by an average of 5%, suggesting more of a "wait and see" before committing money "manner.
digital divide
Industry incumbents are challenged by new market entrants and need to adopt digital solutions to maintain their market position. The study examines the differences between traditional financial firms and digital natives, defined as online banks, brokers, robo-advisors and digital wealth management firms that have been established over the past 15 years rather than being part of existing firms .
The report found that digital natives are more likely than traditional companies to identify transformation as their top strategic priority (78% vs. 51%), characterized by greater increases in digital investment. Seventeen percent of digital natives also report being in advanced stages of deploying artificial intelligence, blockchain, cloud and other emerging technologies, compared to 7 percent of traditional companies.