IBM Study: Banking and Financial Markets CEOs are betting on generative AI to stay competitive, yet workforce and culture challenges persist

Rhea-AI Summary

IBM's recent study reveals that 66% of banking and financial markets (BFM) CEOs are prioritizing generative AI and automation for competitive gains, despite associated risks. Notably, 65% of financial leaders believe success hinges on employee adoption rather than technology, while 60% are pushing AI adoption at an uncomfortable pace. Half of the surveyed CEOs are hiring for AI-related roles that didn't exist a year ago, but 53% struggle to fill critical tech positions. The study highlights the importance of cultural change, as 64% of CEOs emphasize that customer trust is important for success. Despite challenges in collaboration and workforce adaptation, 72% of CEOs aim to accelerate transformational change in 2024.

Positive

• 66% of BFM CEOs prioritize generative AI for competitive gains.
• 57% of respondents believe advanced AI determines competitive advantage.
• 50% of CEOs are hiring for new AI-related roles created in the past year.
• 64% of CEOs agree that maintaining customer trust is important for success.
• 83% recognize the importance of transparency in technology adoption.
• 60% say their teams are skilled enough to incorporate AI.
• 72% of CEOs plan to accelerate transformational change in 2024.

Negative

• 53% of CEOs struggle to fill critical technology roles.
• 60% of CEOs are pushing AI adoption faster than employees might be comfortable with.
• 43% of employees do not fully understand the impact of strategic decisions.
• 50% of CEOs report C-Suite competition impedes collaboration.
• Only 40% have assessed the impact of AI on their workforce.
• 34% of the workforce will require retraining in the next three years.
• Focus on short-term performance is seen as a barrier to innovation.

Insights

Financial Analyst

The findings from the IBM study hold significant implications for the banking and financial markets sector. Generative AI is clearly seen as a competitive necessity, with 66% of CEOs willing to take substantial risks to stay ahead. This suggests that companies in the sector will continue to invest heavily in AI technologies, potentially driving up their operational costs in the short term.

From a financial perspective, the aggressive push for AI adoption could lead to higher capital expenditures and R&D investments, impacting short-term profitability. However, the anticipated productivity gains from AI might offset these costs in the long term, enhancing operational efficiency and profitability. Investors should closely monitor companies' balance sheets and cash flow statements to understand how these investments are being managed.

The report also highlights a significant talent gap, with 53% of CEOs struggling to fill key technology roles. This could mean increased competition for skilled labor, leading to higher wage expenses. Companies that can successfully bridge this talent gap—potentially through strategic acquisitions or robust training programs—might enjoy a competitive edge.

In summary, while the short-term financial metrics might show strain due to increased investments and hiring challenges, the long-term outlook remains positive if these companies can successfully integrate AI technologies and realize the projected productivity gains.

Market Research Analyst

The survey emphasizes the critical role of workforce and cultural changes in AI adoption. Interestingly, 65% of CEOs believe that success with AI hinges more on people's adoption than the technology itself. This underscores the importance of change management and employee engagement strategies.

For investors, this highlights a key area of risk: companies that fail to manage cultural shifts effectively may struggle to reap the benefits of their AI investments. Monitoring companies' human resource strategies and employee satisfaction metrics could provide early indicators of potential success or failure.

The finding that 50% of CEOs are hiring for AI-related roles that didn't exist last year illustrates the rapid evolution of the market. This can create both opportunities and risks. Companies that can quickly adapt and hire the necessary talent will likely lead in innovation. Conversely, those that lag may fall behind their competitors.

The survey also notes that 64% of CEOs believe maintaining customer trust is more impactful than any specific product or service. This points to a strategic focus on transparency and ethical AI usage, which could enhance customer loyalty and brand reputation in the long run. Investors should look for companies that demonstrate a commitment to ethical AI practices and transparent communication.

Technology Expert

The rapid adoption of generative AI in the banking and financial sectors is a double-edged sword. While the technology promises substantial productivity gains, the rush to implement AI solutions might lead to operational disruptions if not managed properly. It is critical to ensure that AI systems are integrated seamlessly with existing processes to avoid inefficiencies.

Moreover, the emphasis on cultural change over technical challenges is noteworthy. This aligns with the broader industry trend where the success of new technologies often depends on user adoption and organizational buy-in. Companies that excel in fostering a culture of innovation and continuous learning will likely outpace their peers.

Another important aspect highlighted is the importance of trust and transparency. With 83% of CEOs acknowledging the need for transparency in adopting new technologies, it is clear that ethical considerations are paramount. Transparent AI practices not only mitigate regulatory risks but also build consumer trust, which is important for long-term success.

For investors, understanding how companies are managing these technological and cultural shifts is essential. Firms that demonstrate robust AI governance frameworks and prioritize transparency and ethical usage will likely be more resilient in the face of regulatory scrutiny and public skepticism.

• Two-thirds (66%) of banking and financial markets CEOs surveyed said that the potential productivity gains from AI and automation are so great that they must accept the risks to stay competitive.
• 65% of financial institution leaders say that succeeding with AI will depend more on people's adoption than the technology itself and 60% recognize they are pushing for AI adoption more quickly than some might find comfortable.
• Half (50%) of financial services CEOs surveyed say they are hiring for generative AI-related roles that did not exist last year and 53% indicate they are struggling to fill key technology positions.

ARMONK, N.Y., June 5, 2024 /PRNewswire/ -- New findings from the IBM (NYSE: IBM) Institute for Business Value revealed that banking and financial markets (BFM) CEOs are facing workforce and culture and challenges as they act quickly to implement and scale generative AI across their organizations.   

The findings are part of an annual global cross-industry study that surveyed more than 3,000 CEOs from over 30 countries and 26 industries, which included 297 BFM CEOs representing retail, corporate, commercial and investment banks and financial markets.

The survey found that generative AI is perceived as the key to unlocking competitiveness. 57% of BFM CEOs surveyed stated that gaining a competitive advantage in the sector will depend on who has the most advanced generative AI.

The findings also revealed that CEOs are navigating complex issues around culture in the era of AI. 59% of surveyed BFM CEOs stated that cultural change within a business is more important than overcoming technical challenges when becoming a data-driven business, with 65% also believing success with AI will depend more on people's adoption than the technology itself.

Despite this, 60% of surveyed BFM CEOs say they are pushing for AI adoption more quickly than some employees might find comfortable. Yet 43% acknowledged that their employees do not fully understand how strategic decisions impact them.

Skills also proved to be an area of focus for the CEOs. While 60% of surveyed BFM CEOs say their teams have the skills and knowledge to incorporate generative AI, more than half (53%) of respondents say they are already struggling to fill key technology roles. In addition, 50% of these CEOs said they are hiring for roles that did not even exist this time last year due to generative AI, showing the rapid shift occurring in the workforce.

"Our research reflects the tremendous pressure CEOs are under to keep their competitive edge. Alongside profitability and productivity, getting the right skills remains a persistent challenge, with CEOs now hiring for roles that did not exist until recently," said Shanker Ramamurthy, Global Managing Partner Banking & Financial Markets, IBM Consulting. "Workforce needs are shifting rapidly in the financial services sector and CEOs must ensure that upskilling programs are prioritized as an important element of any financial institution's enterprise strategy for scaling generative AI."

In addition, 66% of BFM CEOs surveyed stated that the potential productivity gains from automation are so great that they would accept significant risks to stay competitive, with 67% saying they would risk more than their competitor to maintain competitive edge.

However, BFM CEOs recognized that trust cannot be sacrificed for innovation. 64% of surveyed BFM CEOs agreed that maintaining customer trust will have a greater impact on success than any specific product or service, and 83% acknowledged that transparency around adopting new technologies was critical for fostering trust among customers and employees.

"CEOs in the banking and financial markets sector are keenly aware of the competitive benefits that generative AI will bring and are eager to move quickly," said John Duigenan, Distinguished Engineer & General Manager, Global Financial Services Industry at IBM. "In their enthusiasm to embrace the benefits of this potent new technology, it's critical that financial services leaders ensure their institutions are taking steps to engineer trustworthy AI designed to reduce risk and win the confidence of their customers, employees and regulators."

Key Study Findings

BFM CEOs are hedging their bets on generative AI to stay competitive and are willing to take risks to achieve this.

• 57% of respondents believe that competitive advantage will depend on who has the most advanced generative AI.
• Two-thirds (66%) of those surveyed agreed that the potential productivity gains from automation are so great that they would accept significant risks to stay competitive and 67% said they would take more risk than their competitors to maintain a competitive advantage.
• However, customer trust was not a sacrifice CEOs are willing to make. 64% surveyed agreed that maintaining customer trust will have a greater impact on success than any specific product, and 83% acknowledged transparency in adopting new technologies is critical for fostering trust among customers and employees.

The workforce is shifting rapidly.

• 50% of CEOs surveyed said they are hiring for roles that did not even exist last year due to the rise of generative AI.
• Yet, more than half (53%) of respondents say they are already struggling to fill key technology roles.
• 60% of respondents said their current team has the knowledge and skills to incorporate new technologies like AI.
• Only 40% of respondents have assessed the potential impact of generative AI on their workforce.
• Surveyed CEOs say 34% of their workforce will require retraining and reskilling over the next three years – up from just 7% in 2021.

Financial institution leaders recognize it takes a cultural shift to scale AI successfully but face collaboration and adoption challenges within their organizations.

• 64% of CEOs surveyed say their organization's success is directly tied to the quality of collaboration between finance and technology, yet half (50%) say competition among their C-Suite executives sometimes impedes collaboration.
• 59% agree that cultural change is more important to becoming a data-driven business than overcoming technical challenges.
• 65% of BFM CEOs say that succeeding with AI will depend more on people's adoption than the technology itself.
• At the same time, 43% acknowledge that their employees do not fully understand how strategic decisions impact them.
• 60% of surveyed CEOs say they push for AI adoption more quickly than some might find comfortable.
• 64% of surveyed BFM CEOs say to win the future, they must rewrite their organizational playbook.
• 72% plan to maintain or accelerate their organization's pace of transformational change in
• 2024.

Productivity is a top priority but focusing on short-term targets may hinder long-term progress.

• BFM CEOs ranked tech modernization as their highest priority for the next three years.
• Productivity, profitability, and scalability were identified as the biggest challenges facing BFM CEOs over the next three years, with 46% agreeing that generative AI will be one of the most useful tools in helping them overcome these challenges.
• However, BFM CEOs identified the focus on short-term performance as their top barrier to innovation.

IBM is a leading provider of enterprise AI, hybrid cloud architecture, security and ESG insights to the global financial services sector. Its deep industry expertise, extensive portfolio of services and solutions, and its robust ecosystem of fintech partners, empower collaboration, innovation, and creation with clients. As a trusted partner to banks, insurers, capital markets and payments providers, IBM guides financial institutions on all stages of their digital transformation journeys through IBM Consulting and delivers the proven infrastructure, software, and services they need through IBM Technology. For more information, visit www.ibm.com/industries/banking-financial-markets

Methodology
The IBM Institute for Business Value, in cooperation with Oxford Economics, conducted interviews with 3,000 CEOs from over 30 countries and 26 industries from December 2023 through April 2024 as part of the 29^th edition of the IBM C-Suite Study series. These conversations focused on business priorities, leadership, technology, talent, partnering, regulation, industry disruption and enterprise transformation.

The IBM Institute for Business Value, IBM's thought leadership think tank, combines
global research and performance data with expertise from industry thinkers and leading academics to deliver insights that make business leaders smarter. For more world-class thought leadership, visit www.ibm.com/thought-leadership/institute-business-value

About IBM
IBM is a leading provider of global hybrid cloud and AI, and consulting expertise. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Thousands of government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM's hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM's breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and consulting deliver open and flexible options to our clients. All of this is backed by IBM's long-standing commitment to trust, transparency, responsibility, inclusivity and service.  Visit www.ibm.com for more information.

Media Contact

Mary Ellen Higgins
maryellen.higgins@ibm.com
781.789.1911

 

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SOURCE IBM

FAQ

What percentage of banking CEOs are prioritizing AI despite risks?

66% of banking and financial markets CEOs are prioritizing AI and automation for competitive gains, despite associated risks.

How many financial leaders believe AI success depends on employee adoption?

65% of financial leaders believe that success with AI will depend more on employee adoption than the technology itself.

What percentage of CEOs are hiring for new AI-related roles?

50% of CEOs are hiring for AI-related roles that did not exist last year.

How many CEOs are struggling to fill key technology positions?

53% of CEOs indicate they are struggling to fill key technology positions.

What is the importance of customer trust according to BFM CEOs?

64% of surveyed BFM CEOs agreed that maintaining customer trust is important for success.

How many BFM CEOs plan to accelerate transformational change in 2024?

72% of BFM CEOs plan to maintain or accelerate their organization's pace of transformational change in 2024.