The pandemic has been a catalyst for dramatic, rapid digitization across all sectors, including financial services providers. In this time of change and upheaval, financial firms that can pivot quickly to a more digital client experience are well positioned to increase market share and build customer loyalty.

On a large scale, the adoption of AI, blockchain, cloud computing and digital is transforming financial services. Innovative buy-side and sell-side firms are leveraging these technologies, both in their client-facing activities and their middle- and back-office operations, to build more resilient, efficient businesses and more cohesive, interactive client experiences.

The firms that are thriving in this new environment have made the right technology investments, helping them adapt and scale in response to customer needs. By taking advantage of the unique opportunities this rapid shift has created, these innovators have risen to meet the moment.

Now, rather than resting on their laurels, these leaders are doubling down, widening their lead over competitors. In the recent Broadridge Next-Gen Technology Pulse Survey of 500 C-suite executives and direct reports from global financial firms, 53% of respondents said they are accelerating the pace of next-gen technology adoption as a result of the pandemic.

A Cross-Generational Shift

Investing and wealth management have seen a particularly strong shift to digital, thanks to Millennials’ movement to self-directed investing platforms, especially through mobile apps. JPMorgan, for example, has seen large increases in account openings and triple-digit growth in trading volumes through its You Invest platform.

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However, the shift to digital is not limited to Millennials. Older consumers have increasingly embraced digital during the pandemic, shrinking the generational differences in behavior. Regardless of demographics, successful financial services providers have placed a strong focus on digital client support and relevant research during the pandemic, helping investors make smart, long-term decisions in a time of overwhelming volatility and uncertainty.

Digitized Operations and Smart Processing

Along with client-facing activities, financial firms’ middle- and back-office functions are experiencing a tectonic shift. A focus on operational efficiency and increasingly digitized back-end processing is supporting a more seamless front-end client experience.

It also mirrors a wider trend across financial services: Clients and financial professionals are demanding more data in real time, delivered on their channels of choice and in easy-to-consume formats. In response, 49% of professionals polled in the Broadridge Next-Gen Technology Pulse Survey said they are working to speed up data gathering and analysis, while 60% will enhance multichannel client communications.

AI Driving Productivity Gains

In addition to digitizing, financial firms are making process improvements through robotic process automation (RPA) and AI, which can reduce manual effort with high levels of straight-through-processing (STP).

These efficiencies support healthy, resilient operations. In turn, they drive superior front-office performance and client experience. These technologies are particularly impactful in volatile, high-volume markets where traditional operations can get strained.

There has been a strong focus on reducing trade failures and improving the reconciliations process, areas where RPA and AI are providing major benefits. As product-line volumes grow, operations heads are increasingly looking to automation before they consider expanding their teams.

Automating manual tasks with AI allows associates to focus on more effective, higher-value work—a key strategy for financial firms. The Broadridge Pulse survey found that 57% of firms plan to increase automation through AI and RPA in the longer term.

But firms using large-scale automation now may have already achieved much of the cost savings and efficiency gains. Current AI solutions are still mostly suited to very specific tasks, and while they are hugely beneficial, automating more complex tasks will require greater levels of human intervention and cognition. Financial firms must seek more sophisticated solutions and innovative use cases to unlock the next wave of productivity gains.

Blockchain Adoption Picks Up

After a slow start, blockchain and Distributed Ledger Technology (DLT) are gaining momentum, with firms seeing broad-spanning, quantifiable benefits like cost savings, lower friction and reduced operational risk.

Firms adopting blockchain face the challenge of moving to new infrastructure before they retire their legacy platforms. In a highly interconnected industry, this leaves many innovators running in dual mode, using blockchain internally while maintaining existing platforms for outside businesses that haven’t caught up. As more industry players embrace DLT platforms, the scaling and network effects increase the benefits for all players.

It’s All In The Cloud

Underpinning this transformation is an increasingly widespread move to cloud-based solutions and services as firms become more comfortable with their security and privacy aspects. The cloud has also contributed to firms’ resilience and scalability during the pandemic, with some industry leaders now using it for the majority of their services.

Cloud-based services have also enabled more agile responses to client needs and unlocked access to innovative tools only offered by major cloud providers. Because most technology decision-making provides the opportunity to expand cloud operations, the cloud should be considered for every project.

Culture Drives Innovation

In the new landscape of constant change, firms that have readied themselves for the digital transformation can leverage their investments to rapidly adapt and meet the moment. This goes beyond tangible technologies to include cultural values, like openness and a focus on continuous innovation. Respondents to the Broadridge Pulse survey recognized this, with 58% seeking to create a culture of continuous digital innovation at their firms.

This highlights the employee experience as a critical component of innovation strategy. In the work-from-home era, leading firms have relentlessly focused on the safety and well-being of their staff, provided strong digital tools for associates to effectively support clients, and aligned employees’ personal objectives with the firm’s innovation goals.

Data Security Is A Balancing Act

Across-the-board, clean, centralized data is fueling these transformative technologies. At the same time, firms must comply with increasingly stringent and varied data protection regulations. Together, this has intensified the focus on governing and managing client data.

Many financial firms have responded with dedicated data governance groups, systems of checks and balances and personal accountability for all associates. This includes spot checks and regular audits to ensure compliance. Firms are also leveraging a range of high-level technologies, including advanced cryptography, zero-knowledge proof and federated learning, to strengthen data security.

At the same time, customers increasingly expect financial services providers to enhance and personalize their experiences and drive personalization. When interacting with various parts of the business, consumers want their providers to have a holistic view of their relationship with the firm. Data-sharing is what makes that possible. This balancing act emphasizes the importance of giving clients more control of their data with transparent, customizable and flexible data use permissions.

Moving Beyond Legacy Architecture

Many financial firms have evolved through a series of mergers and acquisitions, resulting in a patchwork of legacy systems on older architectures. Their functionalities often overlap, and they don’t communicate effectively with each other. Such complex, unwieldy structures can inhibit innovation and digitization. As a result, many firms are simplifying their systems landscapes to better serve clients and create the digital experience they demand.

Many institutions have undergone years-long processes with fintech partners to acquire or build their ideal platforms. Firms are also entrusting their nondifferentiating functions to third-party providers, which mutualizes the cost of cutting-edge innovation and access to state-of-the-art systems. Simplifying the technology stack can enable a more agile business, clarify data insights and support a seamless, client-centered experience.

Conclusion

As clients and consumers across generations increasingly demand digital solutions, innovative financial firms have leveraged their investments in the digital transformation. Those that have focused on the client experience and operational efficiencies are best positioned to thrive.

Leading firms are taking a holistic approach to technologies like AI, blockchain, the cloud and digital, with a clear understanding of how each supports the client journey. They are emphasizing the employee experience and cultural factors to drive innovation, overhauling legacy architectures, leveraging fintech partnerships and focusing on fundamental issues like data security.

The pace of change is quickening, and competition is growing. As new and fleeting opportunities continue to arise, leaders of financial firms must invest in digitization and leverage it strategically to adapt their businesses and meet the moment.

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