The risk of not taking a risk on innovation in financial technology is becoming harder to defend. Financial technology is developing at an accelerated rate, sustained by growth, rapid digitalization, changing customer preferences, and fast-evolving regulation. Watching from the sidelines and waiting for a signal to commit is no longer viable.

Tom Carey, President of Global Technology and Operations for Broadridge, proposes that financial firms must become customer-first, technology-driven environments – beyond what we’ve seen before.

“The pace of innovation in GenAI and other frontier technologies means firms must commit to new capabilities to adapt to rapid shifts in the competitive landscape or be left behind,” Carey says.

“When I meet with clients,” Carey explains, “I find it useful to set out tangible steps they can take to embrace transformation and put a strong foundation in place. I call it the 4x4 approach, consisting of four foundation elements with four steps for each element.”

The four foundational elements are:

1. Create a highly aligned culture for change and collaboration across all participants — your internal teams, your client partners, and your third parties.
2. Put technology first as the enabler for change — precision focus is necessary with so many new and existing capabilities to embrace.
3. Adopt the component mindset — allowing you to access best-in-breed technology and break your transformation down into executable journeys.
4. Embrace regulation as a driver of modernization and cost reduction.

“The pace of innovation in GenAI and other frontier technologies means firms must commit to new capabilities to adapt to rapid shifts in the competitive landscape or be left behind.”
- Tom Carey, President of Global Technology and Operations for Broadridge

The first foundational element: create a culture for change

Firms that succeed break down organizational silos to turbocharge their innovation culture, according to Broadridge’s 2024 Digital Transformation and Next-Gen Technology Study. Without these building blocks, the sizable investments many firms are making in emerging technologies, like GenAI and blockchain, won’t get off the ground.

“In my experience, the companies that prioritize digital transformation, and invest in a culture of innovation and talent development, are the ones that pull ahead in delivering seamless digital experiences and meeting customer expectations,” says Carey.

Putting the right talent in place remains vital. Broadridge's research finds 85% of digital transformation leaders have gained significant maturity in their talent and culture initiatives. Those who are succeeding at digital transformation are outpacing their peers: only 24% of non-leaders can say the same about their firms.

Recent McKinsey research shows the most important elements of leadership culture are role modeling (46%), developing people (35%), and fostering team discussions (28%), among other factors.¹

Fifty-five percent of firms think the rise of AI will create an even greater need for humans to possess analytical and critical thinking skills according to Broadridge’s research. McKinsey suggests companies with the right reskilling strategy in place can take advantage of GenAI’s value generation, estimated between $2.6–4.4 trillion annually.²

Companies have to be ambitious in dismantling barriers between functions to collaborate in new, organic, and dynamic ways.

The four key steps are:

1. Leaders must clearly define their transformation goal. Make the goals clearly understandable and align them to real business objectives.
2. Communicate the message consistently throughout the firm.
3. Drive collaboration across all participants – your internal teams, your client partners, and your third parties – and verify alignment. Don’t assume.
4. Invest in talent development and reward continuous innovation. Identify employees who can be leaders of change through the organization.

The second foundational element: put technology first

Technology must be viewed not just as a tool but as a fundamental driver of business success. Broadridge’s survey found 80% of executives are spending more on core, foundational technology than ever. Carey suggests four key factors for making the right technology investments to fuel growth.

The four key steps are:

1. When investing in technology, ask the right questions up front:

• Is it truly an enabler for our business and will it create long-term advantage?
• Does it create a better customer experience?
• Will it improve workflows or processes? Or is it a major disruptor?
• Does it create a business advantage, or is it necessary from a technology viewpoint?

2. Put technology at the core of all business operations (based on the answers to the questions above) and integrate it into all strategies and aspects.

3. Take an innovation-driven, proactive, and customer-centric approach and constantly verify assumptions.

4. Make data-based decisions and ensure technology is not just a tool but a fundamental driver of success.

Investing in AI the right way — where it plays a productivity role or offers competitive advantage — can help businesses get ready for what’s ahead while avoiding sunk costs into non-essential technologies.

“Technology will be the battlefield of the future,” Carey states. “AI will be core with AI-driven applications being used to increase the value of data that we hold, offer greater insights into business activities and customer preferences, and present a well-defined roadmap to growth.”

The third foundational element: adopt the component mindset

“Firms have turned away from large-scale, monolithic programs to deliver in component increments,” shares Carey. “A key driver has been a shortening of market payback periods from multi-year to 12 to 18 months.”

A component approach to technology investment allows clients to meet their transformation milestones without compromising other objectives.

The four key steps are:

1. Break larger, more challenging projects down into executable journeys and constantly test outcomes.

2. Put in place best-practice component strategies:

• Adopt a common dataset definition
• Leverage common, publishable APIs

3. Implement a common integration layer to transport and transform your data.

4. Work with providers who can offer modular solutions that integrate with your current technology investments or can power your overall transformation. Look for measurable outcomes, such as cost savings, efficiencies, and increases in productivity.

“We use this component-based strategy to help our clients to manage costs and resources. It also helps to ease pressure on these firms from frequent regulatory updates,” explains Carey.

The fourth foundational element: embrace regulation

“It’s important to look at regulatory change as an opportunity to gain competitive advantage,” says Carey.

The four key steps are:

1. Track and anticipate regulatory change and use it to enable transformation.
2. Use regulatory updates as an opportunity to modernize and rationalize costs at the same time.
3. Create a dedicated regulatory innovation task team.
4. Provide use cases to regulatory agencies that demonstrate your innovation and thinking. Lean on your partners for those use cases, as they have the greatest insights.

The time is now

Investing in innovation can be challenging, but it will never get any easier. The gap between leaders and followers will continue to widen, and indecisiveness can heighten the risk of being acquired by a more agile and innovative competitor.

Creating a supportive environment and a strong foundation for change makes a substantial difference. Put together an innovation task team, gather and assess trend reports, invite external specialists to your meetings for their insights, and use the 4x4 approach to help build a framework for transformational success.

Your company's survival and success may depend on it.