How digitalisation is enabling transformation
When people talk about mutualisation, minds often jump straight to ideas around cost savings and operational efficiencies, and of course these are core benefits – managed services providers can leverage economies of scale for their clients. This transformation model has become much more enticing for financial services firms operating in today’s landscape of complex and constantly evolving regulation.
by Samir Pandiri, President of Broadridge International
However, the concept of mutualisation has evolved and is no longer simply a case of lifting out the non-differentiating operations of a business. Instead, more firms are realising that mutualisation also means shared access to cutting edge next-generation technologies, including AI, blockchain, the Cloud and digital. Each of these technologies is helping to drive much-needed digital transformation across the financial services industry, and many firms are starting to see the fruits of the innovation they can bring.
In Broadridge’s 2022 Digital Transformation and Next-gen Technology Survey, we asked 750 C-suite executives and their direct reports globally on the sell side and buy side about their firm’s digital transformation. The survey explores the financial, operational and strategic benefits of digital transformation, and charts the digital maturity of firms of different regions, sizes and sectors using Broadridge’s Digital Maturity Framework.
Here are some of our key findings:
APAC is leading the way
Broadridge’s report found that Asia Pacific has a higher percentage of firms categorised as digital transformation Leaders (23%). Reasons for this could include access to digital talent, and less stringent regulations than other regions, particularly around the use of data.
However, a shift may be coming. The report found that a higher percentage of firms in North America (57%) are accelerating the pace of change of their digital transformation and next-gen technology strategy, in comparison to APAC (44%) and EMEA (38%).
Variations in digital maturity by sector
The report also highlights emerging gaps across different financial services industry sectors when it comes to digital transformation. Scoring highest in Broadridge’s Digital Maturity Framework are asset managers, who were found to have the highest percentage of Leaders and the lowest percentage of Beginners.
Universal banks and full-service financial institutions came in at a close second – with two fifths of those surveyed achieving Leader status (40%). There was a strong correlation between firm size and digital maturity, and as full-service firms tend to be larger, it is not surprising that they scored more highly for digital maturity. This could be down to economies of scale and bigger firms having a larger revenue base to spread the cost of innovation across. Regardless of the causes, this finding suggests that smaller and mid-sized firms need a clear strategy in place to keep up with the pace of change set by the Leaders.
Some sectors, such as insurance, were found to be very evenly spread across the different maturity levels. However, at the other end of the spectrum, there were very few digital Leaders among the wealth management firms surveyed (13%), and interestingly the majority of retail banks were found to be digital transformation Beginners (54%).
Improving customer interaction is the top priority
While firms of different sizes, sectors and regions may all be at different stages of digital transformation, it was interesting to learn that the key drivers for adopting next-generation technologies are the same. Nearly three quarters of those surveyed (74%) cited enhancing customer interaction as a priority area for digital transformation, followed by improved operations (64%) and sales and marketing (62%).
When it comes to crafting effective digital communications for clients, both Leaders and Non-leaders said that personalising the experience matters most when it comes to the communications that they send. Most Leaders were found to be in the later stages of offering micro-personalised communications, with 38% at an advanced stage and 53% at a mid-level of implementation.
The pandemic played a role in this acceleration, with customers relying more on the digital communications they receive rather than face-face interactions. Technologies such as AI, predictive analytics and machine learning are also increasingly able to facilitate the hyper-personalised solutions that clients are looking for.
Uncovering the true value of digital transformation
For Non-leaders, there can be a number of obstacles when it comes to accelerating their digital transformation strategy. One example is data management and analysis. Many firms are still grappling with creating centralised data models with access to data across siloes. As a result, more and more firms are turning to external providers to gain access to specialised expertise, resources and data visualisation tools (48%).
Other key challenges firms face include access to digital talent, modernising legacy IT infrastructure and lack of an effective roadmap for innovation. However, firms with insufficient resources for an internal innovation function do not need to be left behind. Instead, they can leverage the benefits of a wider ecosystem through the support of FinTech providers.
This approach offers a reliable source of innovative solutions, expertise, data and platforms built on next-generation technologies. In fact, we find that even firms with mature internal innovation functions frequently benefit from external thinking, and new products and platforms that FinTechs can provide.
In conclusion, while there are many challenges to becoming a digital transformation leader, we know it is well worth the investment. Broadridge’s report found that Leaders are 1.5 times more likely to report increased revenues from digital transformation. This is because it drives significant performance improvements across the entire front- to back-office lifecycle, including better fraud detection, enhanced customer experience, streamlined operations, and improved trade and investment analysis. All these improvements will lead to greater customer loyalty, and so it is vital that all firms evaluate their current digital transformation roadmap, and ensure it is fit for purpose to achieve the results they are aiming for in 2022 and beyond.
March 22, 2023
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