Research sees edge for leading financials in next-gen tech adoption
Splash the cash or lag behind. Investments in next-generation technologies and related services/skills enhance profitability and reduce costs for financials, especially for those leading the pack, a recent Broadridge study suggests. Back in October-November 2020, the consulting firm, together with ESI ThoughtLab, had surveyed senior executives at 1,000 companies in eight financial subsectors across 18 countries on their adoption of artificial intelligence, blockchain, cloud and other digital technologies. Respondents to the survey encompassed the following sectors: broker-dealer, universal banks, banks, insurance, asset managers, wealth managers, private equity/debt, hedge funds.
Rise in revenue and profit margin
Assessing the maturity level of adoption of next-generation technologies by financials, Broadridge identified 21% of beginners, 34% of implementers, 28% of advancers and 17% of leaders among the 1,000 participating firms. Overall in 2020, the leading financials in the area stressed a 4.04% rise in revenue (vs. 1.74% for non-leader companies) as well as a 2.55% increase in profit margin (vs. 1.25% for non-leader companies). Financials considered leaders in adoption of next-gen technologies trimmed costs by 2.47% last year (vs. 2.78% for non-leader companies).
Next-gen technology spend to increase by 2023
The research found out that the Covid-19 pandemic has deepened the existing gap between the most advanced financials in adoption of next-gen technologies and their counterparts as the former are speeding up the pace of their next-gen technology strategies, while most non-leaders are slowing down. “Those in the early maturity stages are most likely to be decelerating,” Broadridge highlighted. Furthermore, financials will increase next-gen technology spend in IT budget from 11.8% to 15.7% by 2023 on average according to the report. Firms viewed as leaders plan to increase spending in that field to almost 20%. In addition, Broadridge foresees leading companies will continue to outpace peers in accessing and developing talent. “They are also more likely to outsource work on emerging technologies and purchase solutions from third-party Fintech providers.”
The cloud, a 'must-have'
The cloud remains currently the most used next-gen technology among financials, with 78% of firms reporting being at mid- to advanced stage implementation. Digital follows, with 67% respondents reporting mid- to advanced stage implementation while the rate drops to 25% and 15% respectively for artificial intelligence and blockchain. “AI is being used more selectively. Firms may be underestimating the breadth of potential for this valuable technology,” Broadridge said, while noting that blockchain is “starting to gain momentum as networks grow.” By 2023, developing on cloud is a high or very high priority for 60% of the respondents, followed by digital tech (58%), AI (27%) and blockchain (19%)
The full study is available here.