3 Expectations of the Financial Sector for the Future that Were Not to Be Expected

That a mere year does make a big difference is evident when we consider the rate of technological progress, digitalization, and regulatory changes witnessed over recent months. As shown in the 2023/24 Future of Finance report, advancements in artificial intelligence (AI) as well as advanced data and analytics are perceived as a tremendous opportunity by executives across the globe – with momentum building and curiosity growing as to how these developments can be meaningfully applied. Novel business models are emerging at an exponential rate, digitalization is transforming the way organizations approach age-old processes, and the rapid development of AI will progress. This has led to some surprising results.

Despite several political and economic headwinds persisting globally, financial executives are steadily growing more optimistic about their prospects for growth. This growing levels of optimism among respondents are reflected in how companies view their respective positions for growth over the next three years. Globally, a considerable 64% of companies feel they are strongly positioned for significant growth – up meaningfully from 51% in 2022.

Businesses headquartered in Switzerland, Singapore, and the US are most bullish on their prospects for growth, with 72%, 71% and 70% of respondents in these regions, respectively, stating they are strongly positioned. While companies headquartered in the EU and the UK are somewhat less optimistic, they are by no means pessimistic.

From an institutional perspective, the asset servicing and wealth management sectors are much more optimistic than last year, with 69% and 54% of respondents in these segments, respectively, feeling well positioned – up from just 35% and 36% in 2022 (see graphic below).

As data and analytics capabilities continue to grow increasingly sophisticated over the coming years, it appears financial institutions believe the front office stands to benefit the most from these advancements (see graphic below). Almost half of executives see emerging data analytics providing the front office with the greatest benefits over the next five years. Trading, investment analysis, and portfolio management rank the highest (48%), followed by sales and distribution (46%) – all of them being front-office tasks. Back-office and middle-office operations show slightly lower attributions when it comes to benefits of artificial intelligence (AI).

The front office of financial institutions is responsible for carrying out the most valuable, revenue-generating tasks, including trading, conducting market analysis, and executing the investment strategy. As such, these findings indicate executives hold strong conviction in the strategic opportunity posed by enhancing data and analytical capabilities. Beyond merely increasing operational efficiency and reducing costs, it is seen as a direct contributor to how companies outperform their competition, enhance returns for customers, and deliver organic growth.

This is further reflected by where companies anticipate allocating the most financial resources on data and analytics moving forward. Market and pricing data – used predominantly to inform front-office decisions – is where respondents feel they will see the largest increase in spending, opted for by 43%. Within the capital market industry, the wealth management and the asset servicing sector hold this view most strongly, with 49% and 44% expecting to increase their spending in this area, respectively.

It will come as no shock that integrating AI in its different forms or subsets is now the primary focus for financial market institutions, with almost half (48%) of respondents citing it as a top priority over the coming three years. Indeed, only 6% of respondents do not expect their company to meaningfully incorporate AI as a tool within this time frame.

Faster and more accurate data analysis for better decision-making is seen as the area in which AI will deliver the most client value, with well over half (55%) of respondents taking this view (see graphic below). The asset management, asset servicing, and investment banking sub-sectors feel this most strongly, chosen by 58%, 57%, and 56% of respondents in these fields, respectively.

Increased cost savings and operational efficiency, however, is the least selected potential benefit of AI in terms of enhancing client value. This may suggest companies view AI more as a strategic tool for outperforming competitors through added value, rather than merely a cost reduction technology. This could also indicate companies are anticipating a meaningful delay before any cost savings resulting from the implementation of AI can be realized. After all, despite AI’s versatility and rapid evolution, constructing the necessary infrastructure to support its deployment is initially costly and time-consuming for companies.