Gap Widens Between Leaders and Non-Leaders as Digital Transformation in Financial Services Reaches New Level of Maturity

Rhea-AI Summary

Broadridge Financial Solutions, Inc. study reveals 75% of executives confident in tech transformation with a growing digital maturity gap. Leaders prioritize cybersecurity, GenAI, and talent development. AI-centric customer experiences and innovation culture key to success. Financial institutions to increase cybersecurity investments by 28% in the next two years.

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• 75% of executives confident in tech transformation roadmap.
• Leaders prioritize cybersecurity, GenAI, and talent development.
• AI investments in customer interaction crucial for meaningful engagement.
• Financial institutions to increase cybersecurity investments by 28% in the next two years.

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• None.

Insights

Market Research Analyst

The insights from the Broadridge Financial Solutions study underscore a pivotal trend in the financial sector: the aggressive investment in technology and the intensifying competition for digital talent. The distinction between digital 'leaders' and 'non-leaders' is particularly noteworthy, as it suggests a widening digital maturity gap. This gap could have significant implications for market dynamics, potentially leading to shifts in competitive advantage and influencing investor sentiment towards companies that are perceived as either innovators or laggards in digital transformation.

From a market perspective, the increased investment in cybersecurity and cloud platforms is a response to the growing threat landscape and the need for scalable infrastructure. The 28% projected increase in cybersecurity investment reflects the urgency of protecting digital assets, which could influence the performance and valuation of cybersecurity firms. The focus on AI, including GenAI, quantum computing and blockchain, indicates a shift towards more sophisticated technology solutions, which could foster new revenue streams and enhance operational efficiency for adopters.

Moreover, the emphasis on customer-centric digital experiences driven by AI investments highlights a broader industry trend of leveraging technology to enhance client engagement and satisfaction. This could potentially lead to increased customer retention and acquisition, contributing to the top-line growth of financial institutions that successfully implement these technologies.

Human Resources Expert

The study's findings on the war for talent align with the broader narrative of a skills shortage in the technology sector, particularly in emerging technologies such as AI and blockchain. The disparity in digital skills and talent strategy between leaders (71%) and non-leaders (12%) is a critical factor that could impact the ability of firms to execute their digital transformation agendas. Firms with advanced digital talent strategies are likely to have a competitive edge in innovation and operational agility.

As firms vie for top tech talent, the impact on human capital management and recruitment strategies will be profound. Companies that foster a culture of innovation and prioritize skills development are more likely to attract and retain the talent necessary for sustainable growth. This focus on human capital could have long-term benefits, such as increased productivity and innovation, which are essential for driving enterprise value and investor confidence.

Cybersecurity Analyst

The projected increase in cybersecurity investment reflects a strategic response to the heightened risk environment in the financial sector. As digital transformation accelerates, so does the attack surface for potential cyber threats. The prioritization of cybersecurity by executives not only affects internal security protocols but also shapes the expectations and selection criteria for third-party technology vendors.

This trend has a dual impact: it drives demand for cybersecurity solutions, potentially benefiting providers in this space and it influences the operational risk profile of financial institutions. Investors may look favorably upon firms that demonstrate robust cybersecurity measures, as these are critical for maintaining trust and ensuring the continuity of digital services. The focus on cybersecurity as a top capability expected from technology vendors could also lead to industry-wide improvements in security standards, further shaping the competitive landscape.

Firms pacing investments in core technologies and cyber while promise of GenAI and the war for talent becomes the next battleground

NEW YORK, March 14, 2024 /PRNewswire/ -- As the digital revolution accelerates, financial institutions are racing to create enterprise value by investing heavily through the economic cycle, according to a new study by Broadridge Financial Solutions, Inc. (NYSE: BR). The study found that 75% of executives are confident in their tech transformation roadmap, but a digital maturity gap is growing between leaders and non-leaders. While more than two-thirds say they have made meaningful progress in modernizing their core IT platforms, organizations must make progress against multiple tech and talent frontiers as they grapple with new technologies like GenAI, rising cybersecurity challenges, and accelerating needs for seamless digital customer experiences.

The 2024 Digital Transformation and Next-Gen Tech Study gauges the perspectives of 500 global C-suite and senior executives across the buy side and sell side, illuminating the forces driving the industry's technology modernization. The study categorized firms as digital "leaders" versus "non-leaders," based on their advancement levels across ten essential aspects of digital transformation, including modernized core IT, the use of automation tools, innovation culture, data management, and digital customer experiences, among others.

When it comes to areas of focus, more than 80% of all executives indicate that they are making the biggest day-to-day investments in cybersecurity technology and building an advanced IT cloud platform. Meanwhile the majority also expect to maintain or increase their investment in next-gen technologies like AI, quantum computing, crypto/digital assets, and blockchain over the next two years.

"It's no surprise that we are seeing significant momentum in the adoption of next-generation technology like GenAI from financial services firms looking to solve their most pressing business challenges, while they're also gaining measurable value from more established technologies including AI, blockchain, cloud and core infrastructure platforms," said Chris Perry, President of Broadridge. "Focusing on the human aspect of digital transformation – attracting and retaining digital talent and fostering a culture of innovation – has proven to be just as critical to ensuring these initiatives succeed. Our study also revealed that firms with a decentralized approach to innovation are more likely to be leaders in transformation."

AI-Centric Customer Experiences Anticipated to Be the New Norm

Personalized and seamless digital customer experiences have become an expectation in the financial services industry. In fact, 40% of respondents indicate that being customer obsessed with priorities deeply rooted in client needs is the top accelerator of digital transformation.

Fueling many of these changes in the customer experience paradigm is AI. Seventy percent of leaders (52% overall) indicate that they are prioritizing their AI investments in customer interaction to fuel stronger and more meaningful customer engagement. When it comes to Generative AI, leaders are more likely to be making large or moderate investments in the technology (44%), more than twice the level of non-leaders.

Despite the higher levels of investment by leaders, the lower cost of entry to deploy GenAI may allow non-leaders to get in on the action more easily, enabling them to catch up in their efforts to deploy the technology to both customer-focused and internal use cases.

Focus on Talent and Culture for Innovation Initiatives to Succeed

There have been significant IT advancements year-over year, however there is still work to be done in enterprise-wide skills development. Only 28% of all executives surveyed have reached the advanced stages of implementing a digital skills and talent strategy, a year-on-year increase of 4%.

In addition to the technology aspects of transformation, digital leaders have not neglected the human side. Seventy-one percent of leaders have reached the advanced stages of implementing digital skills and talent strategy, compared with 12% of non-leaders. A further 85% say they have created an advanced innovation culture versus 24% of non-leaders.

Cyber Risks are Still a Top Challenge

As financial organizations accelerate digital customer experiences, they continue to put enormous effort into strengthening trust and security.

Over the next two years, financial institutions plan to boost their investments in cybersecurity by 28% on average; impacting their internal security protocols, but also how they engage with third-party technology vendors. According to the study, cybersecurity is the top capability executives say they expect from their technology vendors, outpacing their ability to deliver projects on time and on budget and building next-generation technologies into their solutions.

Executives also cited cybersecurity risks as the top challenge currently inhibiting the pace of digital transformation at their company.

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.

The full 2024 Digital Transformation and Next-Gen Tech Study can be found here.

Methodology

This Broadridge survey was conducted by ThoughtLab Group to understand how financial services companies are digitally transforming and adopting next-gen technologies. C-suite executives and their direct reports from 500 financial institutions globally on the buy side and sell side were surveyed, with fielding completed in Nov 2023. The total assets or AUM of companies in the sample ranged from $1 billion to over $250 billion. The study scored firms on a range of factors related to progress with digital transformation. Firms were then categorized as digital leaders or non-leaders in the Broadridge Digital Transformation Maturity Framework. For further details on survey methodology, please contact a Broadridge media representative.

About Broadridge

Broadridge Financial Solutions (NYSE: BR), a global Fintech leader with over $6 billion in revenues, provides the critical infrastructure that powers investing, corporate governance, and communications to enable better financial lives. We deliver technology-driven solutions that drive business transformation for banks, broker-dealers, asset and wealth managers and public companies. Broadridge's infrastructure serves as a global communications hub enabling corporate governance by linking thousands of public companies and mutual funds to tens of millions of individual and institutional investors around the world. Our technology and operations platforms underpin the daily trading of more than $10 trillion of equities, fixed income and other securities globally. A certified Great Place to Work®, Broadridge is part of the S&P 500® Index, employing over 14,000 associates in 21 countries.

For more information about us, please visit www.broadridge.com.

Broadridge Contacts:

Investors:
Edings Thibault
Head of Investor Relations, Broadridge
broadridgeir@broadridge.com

Media:
Gregg Rosenberg
Global Head of Corporate Communications
Gregg.Rosenberg@broadridge.com

 

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SOURCE Broadridge Financial Solutions, Inc.

FAQ

What percentage of executives are confident in their tech transformation roadmap according to the study?

75% of executives are confident in their tech transformation roadmap according to the study.

What are the key areas of focus for executives in terms of investments?

Executives are focusing on cybersecurity technology and building an advanced IT cloud platform.

What are the top priorities for leaders in terms of AI investments?

Leaders prioritize AI investments in customer interaction to fuel stronger and more meaningful customer engagement.

How much do financial institutions plan to increase their investments in cybersecurity in the next two years?

Financial institutions plan to increase their investments in cybersecurity by 28% in the next two years.