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Financial Services Industry to Face Technology Disruptions over Next 5 Years, Report Says

04/08/2019 By

During the decade since the global financial crisis, the financial services industry has experienced major technological disruption, experts say.

However, a new report states that 52% of financial leaders say their leadership teams do not appreciate the possible results of continued technology disruption.

According to research released by the advisory and support services specialist Vuealta, “The Future of Financial Services: Planning for Every Eventuality,” the financial services industry may face an array of challenges and disruptors during the next five years.

The survey gauged industry members’ most common concerns and predictions for disruption, which revealed cybersecurity, political changes and regulations as factors that financial leaders expect to cause the most disruption in the years to come.

Respondents to the Vuealta survey considered seven primary areas for disruption in the industry. Almost half (45%) of the respondents said the most disruptive factor to the industry will likely be regulation and compliance issues, while 43% suggested that issues related to cybersecurity are likely to instigate change.

The research notes that political and regulatory changes — like those brought on by previously unforeseen governmental shifts like Brexit — can have major impacts on the financial services industry.

Survey respondents based in the U.K., 54% of respondents, expressed far more anxiety regarding the challenges posed by political changes than the 24% of respondents based in the U.S.

Almost a third of those surveyed said artificial intelligence (AI) and machine learning will likely cause shifts in the industry, and 27% suggested that payments technology would be a likely disruptor.

Additionally, 25% suggested that cryptocurrencies would be most disruptive to the financial industry, with another 18% of votes going to blockchain as a major disruptor. Big data was seen as the least likely disruptor, coming in at 14%.

Banks, investment banks, brokerages, wealth and asset managers, insurers, insurance brokers, payment providers and other members of the financial services industry all face fluctuating market conditions, questions about access to skills and talent, and complex continental and global regulations, the survey notes.

Also among the disruptive factors within the financial services industry is the aspect of lower barriers to entry — allowing new start-ups to crop up across the industry, challenging industry strongholds.

However, Vuealta says competition from start-ups is not viewed by those within the industry as a major concern. According to their research, only 11% of survey respondents ranked such competition as a top concern for the industry throughout the next five years.

The survey also showed a low 20% concern that planning and uncertainty may soon be industry disruptors, and the possible disruption from tech was seen as a concern by 16% of respondents, according to Vuealta.

“Regulation and compliance have been a huge challenge for the industry,” said Ian Stone, Vuealta’s CEO. “From GDPR, to PSD2, MiFID II, IFRS9/15/16/17 — the list is extensive. However, technology and data are often the best solutions to tackle much of the complexity and challenge posed by regulation and compliance.”

Stone explained that he believes the key to handling possible disruptions is planning effectively and having access to the information financial leaders need.

“All too often, businesses are hamstrung by siloed and outdated legacy solutions,” Stone said.

The survey also showed that 50% of decision makers who responded claim to plan with “all departments working from one tool which is updated in real time.” At the same time, 35% of respondents said they keep their planning operations separated within departments.

Stone also explained that in order to effectively plan for the future, businesses must re-evaluate their approach in the face of market challenges.

He said businesses need to consider the “latest technology to bring people closer to plans and data so they can make more informed decisions.”

“The key is to access a clear view of what’s needed in order to formulate and adapt solid, evidenced-based plans at the speed of modern business,” Stone said.

Vuealta said the “Future of Financial Services” survey was carried out independently through Censuswide, a survey consulting firm, to retrieve the insights of 500 business decision makers in financial services organizations across the U.S. and U.K.

Vuealta is an international advising company providing support services for Anaplan, a planning platform provider.