- About this Study
- The revolution goes mainstream
- Next-gen technology's impact
- Overcoming digitalization hurdles
- The role of nascent technologies
- Co-piloting digital transformation
- Lessons learned
Digital transformation enters a new phase - here's what comes next
About this study
The third-annual Broadridge Digital Transformation and Next-Gen Technology Study explores the investment decisions and practical realities financial services firms face during their transformation. This year we surveyed 500 C-level executives and direct reports across the buy side and sell side from 18 countries to understand where they stand today, and what they expect in 2023 and beyond.
- The revolution goes mainstream
- Next-gen technology’s impact
- Overcoming digitalization hurdles
- The role of nascent technologies
- Co-piloting digital transformation
- Lessons learned
The digital revolution is now mainstream
Today the revolution is mainstream: Financial services firms have embraced digital transformation like never before. Widescale adoption of new, more powerful technology is next.
From intriguing to essential?
For many, digitalization is becoming an integral part of their change management and business innovation programs. These once-novel projects are now “business as usual.” Seventy-one percent say AI has significantly changed how they work. More change is coming as AI’s capabilities expand.
What defines a leader
This study looks at what leading firms do differently to accelerate transformation. We categorized firms as Leaders or Non-leaders based on how advanced they are in the most essential aspects of digital transformation. This includes their innovation culture, use of emerging technologies, modern IT infrastructure, seamless customer experience (CX), internal skill-building, and adoption of security and privacy protocols.
“There are major new entrants into the financial services space from non-traditional sectors. Legacy organizations 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.”
— Head of Data and Analytics, US Full-Service Institution
The robots may not be taking over, but they’re certainly making work easier for humans. AI is becoming more powerful. “Smart automation, fueled by machine learning, is helping our employees execute tasks faster, analyze data more quickly and create higher quality work,”
— Head of Operations, Canadian Broker-Dealer
“Very large players will get larger, and then you’ll have smaller boutique firms that are high touch and offer niche services. Everyone in the middle is going to get squeezed”
Senior Partner, UK Investment/Asset Manager
Transformation is lifting off
Respondents are optimistic about the future, despite significant work ahead. Eighty percent think the industry will modernize its tech stack before we land a human on Mars, currently estimated to happen within a decade.
Some will do this by “lifting and shifting” legacy systems in favor of more cost-effective, cloud-based infrastructure that puts microservices and APIs at the core.
The role and impact of next-gen technologies
However, in a challenging economic environment, it can be difficult to justify spending on innovation while trying to juggle the demands of day-to-day operations. But as next-gen technologies mature, firms are reporting improvements in customer acquisition and retention, cost efficiencies, and faster time to market from their use, creating a more measurable business case for investment.
Where is the industry investing, how much progress is it making, and what’s delivering value? And what are firms classed as Leaders doing differently?
Next-gen tech comes of age
Blockchain and distributed ledger technology (DLT) are now creating cost savings and real business value. In the longer term, we’ll see stronger use cases for decentralized finance; firms need to plan for this transition.
These essential tools are more visible than ever, with a clear business case for new investment.
“AI and machine learning are constantly evolving and are becoming more intelligent. AI is aiding us in automation, smart decision making, enhanced customer experience, research and data analysis, error reduction, and increased business efficiency.”
— CTO, Japanese Broker-Dealer
“We are improving our data analysis tools in response to new demands to create predictive analytics, understand purchasing preferences, and identify anomalous fraud detection during transactions.”
— CTO, Danish Retail Bank
“We can onboard customers to new products completely digitally with minimal human intervention and automatic straight-through processing in generation of documents, approval, the whole thing, making the process as quick and effective as possible.”
— CEO, US Broker Dealer
“Using open platforms and APIs enables us to drastically cut both the overall cost and time required in creating and accessing new apps and products.”
— Chief Digital Officer, Chinese Investment/Asset Manager
How much does your firm plan to increase investment in the following technologies (on a percentage basis) in the next two years?
Overcoming hurdles to digitalization
Firms are taking a variety of approaches to navigate the hurdles that inhibit innovation.
Reinvention for a digital world won’t come easy, especially for incumbents with established systems and procedures. More than 40% of respondents say they’re still held back by inflexible legacy systems.
More than a third of firms 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.
The top choice for all others is replacing legacy systems with modern cloud platforms, indicating the gap in progress between the firms leading the way and those lagging behind.
Dramatically expand the use of AI and automation enterprise-wide
Gather, integrate, and provide access to all enterprise data
Be able to anticipate customer needs 5 years from now
“Financial institutions typically grow through acquisitions, which present great challenges. They end up with systems that are often incompatible, creating a spaghetti of technology.”
— CEO, US Retail Bank
“A lot of organizations that are late adopters are going to struggle because they're so far behind, and that’s a challenge,”
— Head of Data Analytics, US Retail Bank
“We took a very traditional commercial bank and modernized the core banking system by bringing in a whole series of best of breed applications developed by fintechs that did things much more effectively.”
— CEO, UK Bank
“Make sure you have the skills and human resources to innovate. Make sure you have enough people with the right digital and compliance skills and have the programs and technology in place to keep them.”
— Senior Executive, US Insurance Firm
What’s next in tech transformation? More nascent technologies
Senior executives understand that they must grapple with adapting to near-term change, while also trying to anticipate how technology will transform the industry’s future.
We asked executives how technology will change industry dynamics in the longer term, what they’re doing to prepare, and which of the newer / emerging technologies such as quantum computing and the metaverse they're investing in for the future.
of respondents agreed that in 10 years blockchain and DLT will become the core of financial markets infrastructure.
“Edge computing and quantum computing will have more focus as we plan to increase our computing capacity, considering the vast amounts of data and universe to be canvassed.”
— CTO, US Investment Manager
“Blockchain will play an important role. By 2030, we will see stronger use cases for decentralized finance. Existing financial institutions will have to figure out how to build bridging between traditional finance and digital asset applications.”
— Chairman, Digital Transformation, UK Digital Bank
Although 39% of respondents agreed the metaverse will become a key channel for client interaction in the next ten years, firms are only increasing investment by 5% on average over the next 2 years. There’s openness to the metaverse’s potential, but most firms are taking a “wait and see” approach before committing funds.
These tools, in tandem with edge computing, the cloud, and AI, offer the ability to harvest data at scale, and analyze it much more rapidly to make more accurate predictions and solve complex optimization problems.
Firms are increasing investment in these technologies, but more incrementally than established technologies.
How much does your firm plan to increase investment in the following technologies (on a percentage basis) in the next two years?
Co-piloting digital transformation
“We have systems and platforms in place to get products into market more quickly, but our technology team and compliance people can't handle that. There just aren’t enough people to handle the processes involved.”
— Senior Executive, US Insurance Firm
0%
Sixty percent of tech leaders and 52% of business leaders say falling behind in digital transformation will hurt their ability to attract and retain talent.
Lessons learned
Technology spending is higher than ever before. Digital and tech transformation is at the top of every leader’s agenda: the question on everybody’s mind is what more can they do to accelerate the speed of innovation.
To answer this question, we looked at:
- The differences between how Digital Natives and traditional financial institutions approach transformation
- How firms classed as Leaders drive transformation
“Think about your place in the ecosystem. The winners will be regulated financial institutions most adept at collaborating with tech and fintech firms.”
Non-Executive Director, UK bank
“Stay focused on your value proposition to give customers what they want. Keep an eye on what is coming in the future, and how you can take advantage of it to benefit your customer.”
Head Of Data And Analytics, US Wealth Manager
“Stay flexible and adapt. We all have strategic plans, roadmaps, and visions, but no matter how good they are you need to be adaptable. Hire people with that mindset in the C-suite. The more visionary people work for Facebook and Google, so you need a good C-suite who are willing to be flexible and adapt.”
CEO, Swiss Private Bank
To think about opportunities, look at businesses that you are not in. Is there a way to experiment or innovate by participating in a network? You don’t have to build it. You can build your business capabilities by participating in a consortium.”
COO, US Investment/Asset Manager
Use technology to drive down the cost of service, improve client data management, and extract more value from data.”
CEO, Swiss Private Bank