Financial service firms that moved fastest to transform into digital-first businesses are beginning to reap the rewards in the form of increased revenues and profits.
A new survey from Broadridge finds that digital transformation is starting to pay off across the financial services industry. More than 40% of the 750 C-suite executives surveyed said they have grown revenues and profits as a direct result of digitization. More than half expect to hit those positive benchmarks in the next two years.
Based on survey results, Broadridge assessed the progress financial service firms have made in digitization. Survey respondents were grouped into four categories ranging from beginners to leaders using a proprietary maturity framework. Among leaders, 71% are seeing increased revenue as a result of digital investments, and 51% are seeing increased profits. Two-thirds of these leaders expect digitization efforts to boost profitability within the next two years.
Because digital transformation helps improve strategic decision making, these benefits should compound over time, as leading firms grow market share and create new revenue streams. Forty-five percent of all firms and more than 60% of leaders say their digital investments have already improved planning and decision making.
What’s driving these returns? The pandemic forced financial service firms to invest in technology to keep in touch with clients during lockdowns. Those investments continued in 2021, with the primary goal of further enhancing the client experience. Firms directed the most investment dollars into customer-facing functions, operations, and sales and marketing. Across their organizations, firms to date have achieved the biggest gains in shifting from paper to digital communications, developing seamless omnichannel experiences for clients across devices, and creating interactive digital documents.
Three keys to growth
Firms are targeting these areas with three key tools that underpin digital transformation: cloud computing, artificial intelligence and data analytics. Most firms by now have mature programs for transitioning operations and infrastructure to the cloud. While the cloud is rapidly becoming ubiquitous, over the past 12 months, some of the industry’s biggest technology advances came in AI. In Broadridge’s 2021 study, around a quarter of firms had achieved what we rate as “mid-to-advanced” levels of implementation in AI. That share jumped to nearly two-thirds (61%) in 2022 and is expected to reach three-quarters within two years. In terms of analytics, two-thirds of firms have already begun setting up centralized data platforms with access to data across divisions, enabling them to serve customers more holistically and make better strategic decisions.
Blockchain technology is playing an increasingly important role in digitization strategies. Over the past year, the percentage of firms that have surpassed the beginner stage in blockchain implementation doubled to 37%. It is expected that more than two-thirds (69%) of firms will leave their beginner status behind within two years.