The following is a guest blog post by Mark Schlesinger, Senior Technical Fellow at Broadridge.

2020 was a major inflection point for financial firms, with a rapid shift to digital interaction forced upon many institutions, employees, and consumers.

To take the pulse of how the financial services industry used next-gen technology to adapt, we surveyed c-suite executives and their direct reports from 500 financial institutions globally on their adoption of AI, blockchain, the Cloud, and digital interaction, what Broadridge calls The ABCDs of Innovation®.

The Broadridge Next-Gen Technology Pulse Survey conducted interviews with buy-side and sell-side firms, including universal banks, commercial or investment banks, broker-dealers, investment/asset managers, insurance companies, hedge funds, and wealth managers. The sample was split equally across the APAC, EMEA, and North American regions and included a mix of firm sizes based on total assets/assets under management.

The survey found that in terms of levels of adoption when the pandemic hit, firms were furthest ahead with their adoption of digital interaction with 78% at a mid or advanced level of implementation. Firms had also made forward strides with the use of Cloud technology, with 66% at a mid or advanced level of adoption.

While firms were somewhat further behind in their adoption of AI and blockchain, 42% were at a mid or advanced level of adoption of AI, and 11% for blockchain technology.

However, the pandemic accelerated the speed of change, with more than half of firms (53%) saying they plan to increase the pace of implementation of their next-generation technology strategies as a result.

Firms in APAC were most likely to be accelerating, with 61% saying they will implement more quickly in comparison with 51% in North America and 48% in EMEA.

This adds to the growing body of evidence that the pandemic acted as a catalyst for technology transformation as firms and individuals were forced into new ways of interacting out of necessity. With innovative firms doubling down on emerging tech and picking up the pace of adoption, it is possible that leaders could open up a competitive gap that is hard for those lagging behind to bridge.

Future Investment Priorities

In terms of investment priorities for the future:

• 58% plan to increase investment in interactive digital technologies
• 60% will enhance multi-channel client communications
• 54% plan to increase investment in artificial intelligence (AI)
• 49% plan to improve their ability to quickly gather and analyze data moving forward

There is also a strong focus on cybersecurity and risk management, with 68% of respondents saying they are seeking to make improvements in this area.

Cultural Factors Remain Important in Driving Innovation

While senior executives are placing technology at the forefront of their plans to adapt to the impact of the pandemic, they also see cultural factors as important, with 59% seeking to create a culture of continuous digital innovation.

The Role of Fintech

The pandemic has also changed the role of fintech providers, with 70% of respondents stating that fintech providers’ ability to offer innovative uses of next-generation technology has become more important. Almost half of the respondents agree that the pandemic increased the need to mutualize – in other words, share or outsource – non-differentiating processing functions to reduce costs and increase resiliency. Commercial and investment banks and broker-dealers agreed most strongly (54% and 49%, respectively). Sell-side companies believe this more strongly than buy-side companies (49% and 42%, respectively). Hedge funds, which are typically much smaller organizations than large banks or asset managers, were least likely to agree (36%).

Key Takeaways

The findings allow us to draw several conclusions:

While financial firms were adapting to change before the pandemic hit – the crisis has further accelerated the speed at which they must evolve.

Smart firms are focusing on customer experience driven by digital technology as client expectations for digital interaction grow. In addition, they are increasingly paying attention to people factors as they look to create a culture of innovation and openness to change at their firms.

Financial institutions are also using the Cloud to underpin their resilience strategy as they adapt to the increased demands of market volatility and home working, as well as increasingly turning to AI to automate manual processes and augment human workers as the technology becomes more widely accepted.

Furthermore, they are mutualizing critical, but non-differentiating functions to reduce costs and allow them to focus on what sets them apart from competitors.

Finally, firms are increasingly turning to the wider ecosystem of fintech providers as a way to mutualize the costs and risks of innovation and leverage state of the art technology solutions. As leading firms continue to double down on innovation in the face of the seismic changes in the operating environment this increasingly means that doing nothing is not an option for firms that wish to stay relevant in the more demanding post-pandemic landscape.

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Mark Schlesinger is a Senior Technical Fellow at Broadridge Financial Solutions, Inc.

Broadridge, a SIFMA Premium Associate Member and Strategic Partner, is a leading full-service outsourcing provider to the global financial industry, capable of meeting the most demanding requirements for efficient, secure, and scalable operational support. Learn more about Broadridge and the ABCDs of Innovation at www.broadridge.com.