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Research Shows that the Performance Gap between Leaders and the Rest of the Industry is Closing

New annual FIS research shows that the performance gap between leaders and the rest of the industry is closing due to the growing uptake of cloud, helping make traditionally expensive systems more accessible to institutions with less deep pockets.

Regardless, average revenue growth over the last 12 months has been more than double for industry leaders (3.3%), compared to the rest of the industry (1.5%). Industry leaders are maintaining their edge through:

  • Addressing operational inefficiencies so peers can focus on adding customer value
  • Applying new tech and aligning company culture with strategic vision
  • Increasing collaboration with third parties

This is achieved through greater technology adoption:

  • 48% of industry leaders are in the process or migrated to the cloud vs 25% of the rest of the industry
  • 84% of industry leaders have centralised organisational data vs 50% of the rest of the industry
  • 26% of industry leaders have implemented AI driven solutions vs 4% of the rest of the industry  
  • 31% of industry leaders are using AI to add client value vs 18% of the rest of the industry

Other key findings on industry verticals are:

Banking

  • 73% of retail banks are designed around product lines and channels rather than customer needs

Asset Management

  • 45% of private equity and real estate funds see M&A as an objective to gain economies of scale and cope with growing regulatory burden and mounting costs vs 27% of traditional and fixed income managers

Insurance

  • 44% of insurers look towards AI to enhance customer experience and cope with operational pressures

Following its release yesterday, TFT quizzed Martin Boyd, Head of Capital Markets at FIS, on the reports findings…

Who are the Readiness Leaders, are they primarily incumbents or challengers?

The Readiness Leaders are the top quintile of performers in the FIS Readiness Index, with the highest aggregate score across six operational pillars: automation, data management, emerging technology, digital innovation strategy, client value and risk management. The majority (55%) of the Readiness Leaders are

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Martin Boyd, FIS

larger institutions ($5bn+), which suggests they are incumbents.

Are process-heavy incumbents finding it more difficult to adopt customer-centric approaches than the more agile challengers?

Incumbents no longer believe that they can create customer experience exclusively on the UX, and need to revisit how they work from front to back. The main difference is that a challenger is not limited by legacy technology or, more importantly, legacy cumbersome business processes – they started with customer centricity as their guiding principle and built everything with that in mind. However, incumbents can become more customer-centric either through innovation to the core or by developing their own direct to consumer offering that leverages new technology and business processes –  miming a true challenger.

Is heavy investment in the six areas your report identifies the only way for financial institutions to avoid being left behind?

While investment in emerging technologies has a particularly strong impact on growth, organisations need to adopt a holistic approach that ensures their future success through targeted investments that add customer value rather than simply address inefficiencies. Ultimately, everything is interdependent and investments in emerging technologies have to be supported through structural change and talent –  that is how Readiness Leaders achieve success.    

Incumbents no longer believe that they can create customer experience exclusively on the UX, and need to revisit how they work from front to back – Martin Boyd

Of the emerging technologies mentioned in the report, which ones should be adopted first or as the highest priority?

Out of all emerging technologies, AI is taking centre stage now as more and more proven use cases such as conversational banking, data-driven customer insights and advice are becoming a reality. When analysing the Readiness Leaders by industry, we see them invest in AI solutions such as chat bots for customer interactions in insurance, data analytics in banking, Natural Language Processing (NLP) among hedge funds to predict public companies’ future revenues, and a new type of hedge fund manager – the millikatals – running Autonomous Learning Investment Strategies.

What impact will Brexit have on the trends identified in the UK – particularly around investment and regulation?

Brexit represents a unique opportunity for the financial services sector to cast fresh eyes on its own relationships with clients and to invest in building resilience to such future disruptions. The need to do so is clear as digital, macroeconomic and regulatory challenges did not begin with, nor will they end with Brexit. The vast amount of companies continue to anticipate investment in new technologies in order to stay competitive and the current political climate does not change this reality.

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