The Future of Financial Services: Embracing AI Digital Transformation and IT Modernization
Almost all, 92%, of financial services companies are already generating profits from their AI investment – New KPMG Global Tech Report
The financial services industry is undergoing a profound transformation, driven by rapid technological advancements and evolving market dynamics. According to KPMG’s latest Global Tech Report, over three-quarters of FS CEOs said AI is a top investment priority. In contrast, 92% said their companies are already generating profit from their AI investment.
Key Stats:
Embracing Digital Transformation Amidst Economic Challenges
Financial institutions are compelled to reassess their strategies in an environment characterized by persistent inflation, geopolitical tensions, regulatory complexities, and global economic uncertainty. Survey participants emphasize that technology is central to navigating these challenges, with a significant focus on digitization to enhance business models. Notably, 81% of banking and insurance CEOs and 75% of asset management CEOs identify generative AI as a top investment priority, underscoring the industry’s commitment to leveraging advanced technologies to reduce costs, improve customer experiences, and build resilience.
Harnessing the Power of AI and Data Analytics
AI and data analytics are at the forefront of the industry’s digital transformation. The report reveals that 92% of financial services companies are generating profits from their AI investments, making the sector a leader in AI-driven profitability. GenAI, in particular, is revolutionizing the industry by automating complex tasks and enhancing customer interactions. However, FS professionals in the report highlight challenges in scaling AI across their organization, emphasizing the need for an integrated approach that includes investing in digital and data foundations.
Navigating Regulatory Complexities
Regulatory developments remain a significant concern for financial services executives, with 75% stating that complex regulations adversely affect their investment confidence. The sector’s inherent exposure to elevated risk and regulatory challenges necessitates continuous innovation to manage these demands effectively. While progress has been made, evolving risks and responsibilities continue to weigh heavily on technology decision-makers within the industry.
Prioritizing IT Modernization and Simplification
The report identifies a critical need for financial institutions to modernize and simplify their IT infrastructures. A notable 58% of executives admit that flaws in their foundational enterprise IT systems disrupt business operations weekly. To address this, there has been a significant uptick in the implementation of cloud-based platforms, with 82% of organizations prioritizing investment in Everything-as-a-Service (XaaS) in 2024. These investments aim to simplify digital infrastructures, improve resilience, and reduce unnecessary complexity.
Strategic Actions for Future Success
To capitalize on digital transformation opportunities, financial services organizations should:
By embracing these strategies, financial institutions can position themselves to unlock unprecedented growth through digital innovation. However, financial services organizations must move beyond siloed, short-sighted tactics. A holistic approach to digital transformation, encompassing advanced technologies and modernized infrastructures, is essential for achieving enterprise-wide value and sustaining long-term success.
Rob Fisher is the U.S. leader of the Financial Services Consulting business at KPMG and serves as the Consulting Sector leader for Insurance. He leads teams that take a future-forward approach to financial services, helping institutions navigate transformation through insights, innovation, technology, and process optimization.