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Financial services companies have made big strides in digital transformation in recent years. Firms are investing heavily through the economic cycle, modernizing their core IT platforms to support continuous innovation and adopt next-gen technologies, such as AI and blockchain.
Only a few years ago, many institutions struggled to overhaul aging systems, and the existential threat of disruption from digital-first upstarts was tangible. Now in a sharp reversal, executives are feeling the most bullish about their plans. In fact, 75% of C-suite executives and senior leaders Broadridge surveyed say they are confident about their transformation roadmap, and a little more than two-thirds say they have made meaningful progress in modernizing their core IT platforms. These leaders are capturing a significant technological dividend, benefiting from a virtuous cycle of progress and reinvestment.
Read the full introductionOrganizations can’t afford to slow down. Rather, they have to double down on their transformation efforts. Disruptive new technologies like GenAI, as well as ever-escalating cybersecurity concerns, are pushing companies to innovate along multiple tech frontiers at the same time. To meet accelerating needs for a personalized and seamless omnichannel customer experience in a cost effective manner, companies are increasingly recognizing the imperative of putting the customer first by leveraging technology.
However, as firms try to maintain momentum in their digital transformation efforts, they are hitting their own self-imposed limits. Only around one-third of financial services companies leading in digital transformation have built seamless digital customer experiences — far behind the standard in many industries — and about one-third of these leaders are at the advanced stages of harnessing the latest technologies. Many of these challenges stem from the difficulty all companies face in attracting and retaining sufficient digital talent and building a culture of innovation: Only 28% of all surveyed have reached the advanced stages of implementing a digital skills and talent strategy, and only 41% say they have an advanced innovation culture.
Now in its fourth year, the 2024 Annual Broadridge Digital Transformation & Next-Gen Technology Study offers a snapshot of five trends that are defining excellence in today’s complex financial services environment — and emerging areas such as GenAI that require greater attention from executives to sustain the momentum and harness new opportunities.
This year’s study surveyed 500 C-level and senior executives in 18 countries, representing firms across the financial services spectrum. Their average total estimated assets/assets under management (AUM) was $122 billion. Two-thirds of respondents were C-suite executives, while the rest report to the C-suite or serve as heads of a business unit.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
To determine what separates the leaders from other organizations, we asked executives how advanced their firms were across 10 key dimensions and classified the top 25th percentile as leaders in digital transformation:
The 10 key dimensions of digital transformation leadership
Innovation culture
Digital customer experiences
Digital regulatory compliance
Automation tools
Modernized core IT
Digital skills and talent
Data security and privacy
Agile software deployment
Data management
Harnessing emerging technologies
We saw that a profound gap has opened up between leaders and non-leaders. 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. For example, 44% of leaders are making moderate to large investments in GenAI — more than twice the level of non-leaders (beginners and advancers).
Financial services executives are capitalizing on strong investments in core IT platforms and accelerating plans to invest in next-gen technologies with the most impact.
For all the talk about GenAI sweeping financial services, more than 80% of all executives surveyed said they are making the biggest day-to-day investments in building an advanced cloud platform for digital transformation.
Executives have invested heavily in moving core IT platforms to the cloud to support continuous innovation and create an integrated data platform accessible across business departments. To safeguard their platforms and data, they have adopted cutting-edge cybersecurity technologies and processes.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
Leaders are three times more likely than non-leaders to have reached the advanced stages of implementing the foundational elements of digital transformation: modernized core IT, data management, and automation.
That said, even leaders have more to do in some key areas of digital transformation. Despite progress over the last year, more than three-quarters are still not at the advanced stages of digitizing and simplifying regulatory compliance, adopting agile engineering approaches, deploying API-focused services for software development, and using automation to streamline processes.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
In the next two years, the majority of respondents also expect to maintain or increase their investment in next-gen technologies like AI, quantum computing, crypto/digital assets, and blockchain, with AI and blockchain showing the strongest growth. Despite all the activity, only about one-tenth of non-leaders are at the advanced stages of harnessing these technologies’ potential, as compared with slightly over one-third of leaders. There’s significant room to grow for everyone.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
Customer centricity is the key to maintaining relevance, increasing loyalty, and winning market share as firms compete in a rapidly evolving landscape.
Forty percent of survey respondents said being customer obsessed, with priorities deeply rooted in client needs was the top accelerator of digital transformation. In the past, executives have tied their efforts to driving down costs and improving efficiencies.
To meet fast-changing customer expectations and behaviors — particularly as new generations come of age — firms are recognizing the need to move quickly and drive innovation across products, services, and experiences. When asked how they would use a magic wand to accelerate their digital transformation efforts, most executives chose having a crystal ball to help anticipate customer needs.
2024 Magic Wand Insight
Financial organizations made headway in creating seamless digital customer experiences in the 2024 study: 22% are now advanced, compared with 14% in the 2023 study. Although more work needs to be done, more than half of leaders are at the advanced stages of delivering seamless digitized customer experiences — almost six times as many as non-leaders.
Speaker 1 [00:00:01] We live and operate and work in an environment now where consumers have such amazing power. Brands aren't necessarily in control of how customers experience things. I think about the impact of social and other channels, and if we are going to think about the power of the consumer, then to be customer obsessed is a a requirement in being able to deliver experiences that give value and help you stand out in that consumers experience. So I think maybe the better question then, what does it mean to be customer obsessed is why we should be customer obsessed. One of the ways that firms can create a great customer experience is to be nimble, be flexible, to create opportunities to shift with the consumer's needs. You could be engaging with a piece of paper, or looking at a monthly statement or a bill, and seamlessly shift into a digital experience where there's a depth of data available, but you have to have that solid foundation in place to be able to provide those great experiences, to personalize them, and make those experiences powerful for the individual. Being customer obsessed is a major driver in firms deciding to take on changes in their process, in their tech stack that deliver great experiences. Research shows that individuals can end their relationships with firms if they're not being delivered, wonderful experiences that draw them back. And that applies to everything in the consumer's experience in their household, from a wealth statement to an insurance form, to a credit card. Just because you're in a regulated market doesn't mean you have a free pass on delivering a great experience for your customer. You need to be able to compose experiences in a multitude of channels. You need to be able to deliver those experiences in different ways, and then you need to be able to wrap all that up, with the analytics to create this constant learning cycle where you optimize that experience. And those core capabilities have allowed us to do some really amazing and innovative things with firms around the globe. There's such a gap between the best digital, seamless experiences in the marketplace and between those who are trying to deliver that. So as leaders really hit the fringes and continue to push the experience for individual consumers, it is going to make it more challenging for those that haven't yet invested to catch up. Certainly not impossible. But I think the message would be if you haven't doubled down on your customer obsession, this is the time to do that.
Although GenAI has been capturing the headlines lately, financial firms have been harnessing AI for years.
More than 95% of firms surveyed are investing in AI, with top investment priorities in client-facing front-office functions such as customer interaction and research, as well as the data management systems to support those activities and the risk, fraud, and data security to protect them.
Digital leaders are placing a greater priority on deploying AI across the enterprise in the next two years. They are more likely than non-leaders to prioritize investment to improve decision making and deliver business value.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
GenAI captures attention and investment
Since the GenAI platform ChatGPT emerged in late 2022, companies have engaged in a flurry of investments in use cases and skill development. They are deploying AI chatbots and next-gen tools to augment and automate the work of employees in customer service, portfolio construction, software development, and compliance and risk management.
Among digital leaders, 44% are making moderate to large investments in GenAI, more than twice the percentage of non-leaders. Having more advanced data platforms and greater resources, the largest organizations in our survey — those with AUM/assets over $250 billion — are the most likely to embrace GenAI.
More than half of big firms are placing moderate to large bets compared with about a quarter of the smallest firms. Despite all the promise, however, only 46% of firms using GenAI have a clear strategy in place to mitigate its risks.
Speaker 1 [00:00:01] The participants in our study recognized the impact of generative AI. Over 70% of them see eye as a top investment priority. And if we look at those that we've identified as digital leaders, they'll recognize that part of their leadership, depends on the adoption of generative AI. Generative AI really provides a once in a lifetime opportunity for a radical acceleration of digital transformation strategies. It enables us to very rapidly build compelling new user experiences at a pace that we've never done before. It also provides superpowers to the professionals that are organizations, as they engage with customers. Firms need to do three things differently to take full advantage of generative AI. First, they need to invest in training their staff, particularly at the business leaders who are going to drive adoption. And in fact, in our study, 46% of participants said they were doing that. The second thing is to create a safe environment for access to the technology in a way that has some controls and monitoring. The third thing that firms need to do is to think through a tiered approach to risk that allows them to segregate out those use cases which have the highest risk, potentially from hallucination or from harmful bias in the models. Some of the most impactful areas for generative AI are improving the customer experience. We're seeing people using chat bots powered by generative AI to enable much more rapid responses to client questions. There's some very interesting uses of gender of AI to allow customers to access quite complex data and navigate through it using a chat interface, as opposed to traditional menus or dashboards. One area that customers are maybe not thinking about as much as they should be is applying generative AI in the area of operations. And then our own work at Broadridge was seeing tremendous opportunities to make, back office and all kinds of middle office operations much more productive using generative AI. As we look ahead at the impact of generative AI, we're really excited about the opportunities we can create compelling solutions by combining predictive analytics, such as machine learning with generative AI that allows us to make predictions that help our customers be far, far more productive. So I really think that all the different flavors of AI are coming together, and they're all expanding in their scope. And that promise.
“Many firms are still grappling with how to capture value with GenAI while ensuring compliance to evolving regulation. Firms need to rapidly ‘learn by doing’ to remain competitive — using GenAI platforms that intrinsically manage risk.”
How financial firms are using GenAI
Organizations are already using the large language models (LLMs) behind GenAI for a wide range of tasks where insight generation can make a difference, including:
BLOCKCHAIN INSIGHTS
Blockchain comes of age
Companies are well on their way to building out a blockchain infrastructure. Executives plan to increase investment by 20% on average over the next two years and almost three-quarters of leaders are midway through or advanced in their implementations as compared with one-third of non-leaders.
Expand for more insightsSource: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
The evolution of the approach to blockchain — from conceptual “frontier” technology to specific, measurable implementations of distributed ledgers — offers broad lessons for digital transformation. Although fewer firms are investing in blockchain, those that are see the technology as a way to save time and resources, particularly in areas such as trading and transactions, and back-office operations. In critical areas, such as security origination and post-trade processing, 36% of respondents agreed that “blockchain/distributed ledger technology will reduce the need for intermediaries like custodians and clearing houses.”
“Blockchain and DLT have moved into a more mature stage of development. Rather than seeing projects in isolation, leaders have increasing amounts of data and experience to make informed decisions about where these technologies will provide tangible, meaningful benefits.”
CollapseIn the age of GenAI and blockchain, cybersecurity is more important than ever before.
1.
Boston Consulting Group. 2019. Reigniting Radical Growth.As financial organizations accelerate digital innovation, they continue to put enormous time and effort into strengthening trust and security.
Cybersecurity is the top capability executives say they expect from technology vendors, outpacing their ability to deliver projects on time and on budget, and building next-gen technologies into their solutions. 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.
2.
Tanium. 2022. Survey: The Risks of the Cybersecurity Talent Gap Are Getting Worse | Endpoint.Many firms report challenges addressing cybersecurity risk
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
Speaker 1 [00:00:05] New technology is very exciting and customers are eager to adopt it. However, with new technologies, there's increased cybersecurity risks that comes with that. Gen AI, for example, leverages data, written communications and voice. Blockchain, which is a distributed means of transacting, also uses data. Therefore, there is definitely an increase in cybersecurity threats around data exposure and social engineering attempts related to written communications and voice and exposure to compromised authentication. Cybersecurity attacks are becoming much more sophisticated. The cyber industry is spending over $20 billion to address these risks. The need for more robust security measures and advanced technologies are requiring companies to increase their spend. Some companies are not recognizing how much needs to be invested in a proper cybersecurity framework. Adopting new technologies like AI and blockchain also require security to be part of the implementation process. Executives used to be focused on the importance of on time and on budget, but security is now at the forefront of their concerns. Vendors need to be focused on the importance of customer information and the integrity of the systems. Security is a very expensive endeavor when it's an afterthought. Our survey found that 48% of beginners cited cybersecurity as a challenge. This makes sense as beginners are in the early adoption of their digital journey, so their infrastructure is not as mature as some of the leaders stated. Whether you're going at it alone or partnering with a vendor, an organizational mind shift is important during this transition, as people and process are critical to the success of your cybersecurity plan. Cybersecurity isn't just about a hardware or software change. It's about end to end security and your networks, your databases, your data, and your end points.
The accelerated pace of transformation and the promise of new tech like GenAI are reinforcing the need to harness the power of people and culture.
As executives grow more confident in their transformation roadmaps — and tackle their core IT modernization needs — their attention necessarily shifts to maintaining their momentum. For innovation initiatives to succeed, the human side of transformation has become the latest battleground.
Many firms see focusing on the human part of change, fostering a “fail fast” mentality, and breaking down organizational silos as critical factors in turbocharging their innovation cultures. Without these building blocks, investments in emerging technologies like GenAI and blockchain won’t generate sustainable impact at scale.
Top accelerators of digital transformation cited by executives
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
Given the shortage of people with digital skills, however, financial firms made less progress from the 2023 study to the 2024 study in reaching the advanced stages of developing enterprise-wide skills to drive digital transformation, improving only four percentage points among all firms surveyed.
Speaker 1 [00:00:04] There are several things that farmers should be doing to grow and foster the culture of innovation. One is you want to experiment, right? You want to get your hands dirty. You want to go out and hire the people necessary to experiment in novel new areas as well. You want to engage with the ecosystem. That means engaging with the regulators or academics or investors. The point is, you want to be in the room when decisions are being made. Another area is focused around partnerships. We cannot do this alone. And another area is you want to focus on change management. This is an area that I think a lot of firms really underestimate in terms of importance. Think about the fact that when you go from POC to enterprise wide rollup or industry rollup, there's a lot of change that need to take place. Our 2024 Digital Transformation survey highlighted that 45% of firms are allowing their associates to leverage Genii for work purposes. It's an imperative that this number grows over time. There are repercussions from the point of view of productivity competitiveness, but also engage associates where you want to engage your associates. And this is a way to do that as well. I broadridge we allow 100% of our associates to leverage Genii for work purposes. We spent 18 months building our AI platform, which has resources and tools our associates can leverage to do things such as summarize meetings, generate presentations, generate RFPs, etc. the survey highlighted in terms of the 25% training. You know, we think that number has to be much higher. So you first have to equip your workforce to be successful. I think the second thing is sort of around your values. And one of the things that I think I'm very appreciative of is our CEO, came out and said, look, we are going to be a leader in AI. That set the tone right. And in terms of setting the tone, that then really allowed us to sort of organize around sort of that mandate right around top of that battlecry. And so from that perspective, you know, we are heavily involved in sort of AI, AI, in organizing ourselves around that and investing in our people, in experimenting, in engaging with industry trade bodies, but also in making sure that we have the right processes in place to be able to adopt that. Here at Broadridge, we've embraced the build fast, fail fast mentality really across all our innovation activities. That includes our 6 or 5 labs, which is really focused around experimentation. Let's go ahead. Let's build something. And when we build something, we know we're going to learn and we failed. That's okay because we're going to turn around and try again. It shows the fact that with innovative technology like Janai, you really able to move the needle very quickly on standard industry problems that have been plaguing our customer base for a very long time. So those are some of the benefits that we're seeing from the investments we're making in innovation and talent in our people.
Fifty-five percent of survey respondents say the rise of AI will create an even greater need for humans to possess analytical and critical thinking skills. After all, many use cases, such as customer service chatbots and risk-scoring tools, are using GenAI to augment human effort rather than replace it, clearing the way for work that is less mundane and more creative.
The industry sees major potential for GenAI, but the majority of firms have not yet defined a strategy for reskilling their teams. Financial firms stand to benefit from some of the biggest productivity gains from GenAI, yet our research indicates most firms are still in the early stages of preparing for the coming wave:
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
3.
McKinsey. (2023). Economic potential of generative AI.The gap between leaders and non-leaders is growing in key areas of digital maturity. The pace of innovation in GenAI and other frontier technologies means firms must invest in new capabilities to adapt to rapid shifts in the competitive landscape. Here’s how leaders are pulling ahead, and how those following can keep up.
Invest in talent and culture to fuel innovation
Leaders understand that a digital skills shortage can hold firms back and are adapting quickly to take advantage of newer technologies like GenAI. Nearly a third of leaders are committed to training their employees on how to use GenAI tools, and have already set up internally hosted generative AI platforms that employees can use to support their day-to-day work. Organizations need to foster a culture of innovation, breaking down silos, while sourcing and retaining the best tech talent.
Be strategic with next-gen tech
Emerging technologies like GenAI have the potential to generate an exponential return on investment. It will be crucial to focus on use cases that drive impact and build valuable expertise in how to deploy this nascent technology. Firms must also continuously balance risk with appropriate safeguards for each use case. The pace of innovation means the greatest risk is not investing in next-gen technologies. The gap between leaders and the rest could further widen as leaders gain valuable expertise and scale critical technologies of the future.
Double-down on digital maturity
To be truly transformative, firms must invest in a range of core technologies and competences that together create a force-multiplier effect. Leaders are building enterprise platforms and data capabilities that facilitate rapid innovation and scaling of next-gen technology, often in the cloud and underpinned by robust cybersecurity.
Source: Broadridge 2024 Annual Digital Transformation & Next-Gen Technology Study
Themes from the 2024 Digital Transformation & Next-Gen Technology Study reinforce that digital transformation playbooks need a holistic approach to technology, talent and culture. When done right, firms can reap outsized performance gains and competitive advantages well into the future.
At Broadridge, our expertise and industry-specific technology, solutions, and intelligence power digital transformation for leading firms globally – helping them stay ahead of today’s challenges while preparing them for what’s next.
Broadridge prepares you for what’s next
Broadridge sits at the intersection of financial services, providing the technological infrastructure for everything from trading to debt servicing, deal making, regulatory compliance, and shareholder communications. We modernize platforms, digitalize communications, and offer next-gen technology and data solutions that help our help our clients and the industry operate, innovate and grow.
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