The top three roadblocks stopping financial services firms from rolling out effective digital transformation strategies are the inability to keep pace with technological change, the lack of a roadmap for innovation, and the struggle to modernize IT infrastructure, according to a survey from financial technology services provider Broadridge.
Broadridge’s Digital Transformation Next-Gen Tech Survey report, which surveyed 750 financial services firms covering all regions including the Americas, APAC, and EMEA, found that these are the major obstacles preventing firms from capitalizing on the growth momentum that the pandemic has brought many of them, and the combination of all of these roadblocks poses an even bigger challenge.
Final data from last year has yet to be tallied and analyzed, but the global financial services market was expected to grow from $20.4 trillion in 2020 to $22.5 trillion in 2021, according to a report from The Business Research Company.
Pace of change is biggest challenge
More than 30% of the firms surveyed said that the pace of technological change was their biggest challenge on the road to digital transformation.
Companies need to have a clear and adaptable strategy to keep up with technological advancements, especially since the pace of change is set to increase, driven by advancements in AI and the near-imminent wave of quantum computing, according to Mark Schlesinger, Broadridge’s senior technical fellow.
The report warns that the only way financial services companies can keep up with the ever-changing landscape is to ensure that they have the right talent with the right set of skills.
“There’s really two subcomponents in this problem — one is the lack of skills in the marketplace and the other is maintaining a focused effort to reskill existing IT associates,” Schlesinger said, adding that companies can attract the right talent and keep them motivated by reviewing pay scales, benefits and promotions being offered.
Schlesinger warned, however, that reevaluating pay scales could be counterproductive as a shortage of tech skills and higher pay scales is a huge driver of inflation in developed countries such as the US.
“The question to really ask here is ‘Do the best technologists want to work at your company?’ These technologists should seek you out to say ‘Hey, this is a great place to work because of innovation, benefits to the industry etc.’. And you need a good talent acquisition team to help you to align with to help execute on this,” Schlesinger said.
Reskilling employees is an answer
To reskill existing employees, companies should first identify skill gaps and key associates that are willing and able to enhance their skill inventory in a way that it is beneficial to both the company and the employee, he said.
The report also points out that companies can retain technology talent if they have a proper ladder or organization structure in the IT domain, much like other management functions. This will enable IT experts to feel wanted by the company, Schlesinger said, adding that strong, fleshed-out job descriptions also help.
Separate reports from Deloitte and McKinsey show that, while most financial institutions can attract the right talent, they frequently are unable to retain them.
Almost 21% of respondents in the Broadridge survey said that modernizing IT infrastructure was proving to be another major roadblock to digital transformation.
According to Schlesinger, financial services companies have a hard time keeping up with progress and changes required due to business or operations demand. “There is the core hardware: networks along with platforms such as the databases and middleware and on top of that there are applications — these all need to be in sync,” Schlesinger said.
According to the report, another major challenge for financial services firms is the lack of roadmap for innovation, with nearly 23% of respondents saying that is one of their biggest challenges.
“Firms with insufficient resources for an internal center of excellence or internal innovation function can benefit by leveraging the wider ecosystem of fintech providers. This approach offers a reliable source of innovative solutions and platforms built on next-gen technologies,” Schelsinger said, adding that even firms with mature internal innovation functions frequently benefit from the outside thinking and innovative new products and platforms fintech companies can provide.