Digital transformation continues to shape the future of financial services. From cybersecurity to low-code innovation and AI, adapting and implementing sophisticated digital strategies is essential to firms as they align with new regulations, optimize their services, and provide exceptional experiences to both clients and prospects.
However, many firms have not yet seen business results following heavy investments in technology. For example, 43% of firms claim their investments in low-code and no-code solutions have not improved their performance or profitability over the past 24 months, KPMG reports. They may lack a winning strategic approach toward digital transformation, often struggling to meet client needs, to streamline regulatory compliance, or to foster a culture of innovation within their organizations.
There are opportunities for firms to make a real difference in their digital transformation efforts as 2025 approaches. In this article, we share industry thought leaders’ own perspectives on the future of digital in finance and what financial firms can do to stay ahead of the curve. Through direct quotes from some of the industry’s most prominent voices, we hope to shed light on the challenges, opportunities, and emerging trends shaping the digital landscape of financial services in 2025 and beyond.
Modernizing Technological Infrastructure
Modernization is paramount for financial services firms striving to retain competitive advantages in an increasingly digital landscape. “The sector is in a very strong position, having invested heavily in technology over the past five years, but this is also a moment of potential frustration,” says Paul Henninger, Head of Connected Technology at KPMG in the UK. While “firms have modernized and are now running on top of a more contemporary set of technologies… this has not resulted in a spontaneous change of their businesses — there is still work to do to complete the change required to realize the value of all of this new capability.”
Legacy systems can stifle innovation and flexibility. “For many organizations, legacy systems are seen as holding back the business initiatives and business processes that rely on them,” says Stefan Van Der Zijden, VP Analyst, Gartner. The onus is on FI leaders to proactively address these limitations by adopting agile, cloud-based solutions that facilitate responsiveness to market changes and customer needs. “When a tipping point is reached, application leaders must look to application modernization to help remove the obstacles.”
But as Antony Jenkins, former chief executive of Barclays PLC describes, “legacy systems from different generations are layered and often heavily intertwined”—resulting in the creation of siloed data, limiting real-time decision-making, and complicating digital transformation in other capacities.
By transitioning away from legacy systems, financial service leaders not only enhance their operational efficiency but also position themselves to leverage critical emerging technologies. This strategic shift is crucial for creating a more innovative culture that prioritizes the customer experience and aligns with evolving regulatory demands, ensuring long-term viability in a competitive landscape.
Next Steps for Modernizing Technology Infrastructure
Firms can take steps now to move on from legacy systems and truly modernize their technology infrastructure. These steps include:
- Conduct a comprehensive assessment of existing legacy systems to identify pain points and areas ripe for modernization.
- Invest in cloud-based solutions that promote flexibility, scalability, and seamless integration with new technologies.
- Foster a culture of innovation within the organization by encouraging collaboration and training on modern tools and practices.
- Prioritize a phased approach to modernization, allowing for gradual implementation while mitigating disruption to ongoing operations.
- Engage technology partners who have experience in legacy system migrations to provide guidance and expertise throughout the transition process.
Competing with Disruptors
Fintech companies continue to disrupt traditional banking models by offering agile, customer-centric solutions that leverage technology to streamline financial services and enhance user experiences. These solutions are driving new business models and experiences that are shaping client expectations of financial services. “Fintech is the R&D function of financial services in the digital age….less to do with technology, more to do with business model reinvention and customer-centric design,” said Chris Skinner, fintech author and speaker, when fintech first began to take hold in the industry.
As recent advancements in artificial intelligence (AI) and data governance emerge, these firms are poised to intensify competition, capitalizing on real-time data insights and sophisticated algorithms to tailor their offerings and drive innovation in ways that established banks may struggle to match.
But in addition to competitors, fintech firms can become partners and even solution providers to traditional financial firms hoping to combine their legacy reputations and history of client results with digital capability regulators and clients have come to expect. Mike Henry, Executive Vice President, Enterprise Risk Governance at Scotiabank expands on this thought: “Banks can partner with fintech to build an ecosystem where the size of the pie grows for the banks and third parties.”
Financial firms should invest in collaborative partnerships with these agile entities, leveraging their innovative approaches to enhance customer satisfaction and service delivery. Additionally, firms must prioritize digital transformation and data analytics in their core operations, fostering a culture of innovation that not only keeps pace with fintech advancements but also anticipates future market trends.
Next Steps for Competing with Disruptors
Firms can take steps now to both partner and compete with industry disruptors, such as fintechs and similar tools or organizations. These include:
- Identify potential fintech partners that align with your business goals and can contribute to your technological advancements.
- Establish clear communication channels to foster collaboration and ensure both parties are aligned on strategic objectives.
- Develop pilot programs to test joint solutions, allowing for iterative improvements based on customer feedback and performance metrics.
- Create joint marketing initiatives to promote innovative offerings to existing and potential clients, enhancing visibility while capitalizing on combined strengths.
- Continuously evaluate partnership outcomes and adapt strategies based on market shifts and emerging technologies to maintain a competitive edge.
Keeping Up with Artificial Intelligence
AI and machine learning are reshaping investment strategies, wealth management, and client interactions. By automating routine tasks and processing vast amounts of data, these technologies offer financial institutions the potential to streamline operations and deliver personalized services at scale. Many of the industry’s widespread, sanctioned use cases of AI are yet to be seen; but minds are at work in terms of bringing about their success.
For example, there are opportunities for AI to improve the consistency of financial advice. According to a recent World Finance article, “AI is inherently consistent, so it can provide a much narrower picture of what will work and what won’t based on previous information,” said Jim Pendergast, Senior Vice President and General Manager at AltLINE by The Southern Bank. “When it comes to investing, having this level of consistent understanding of the market can help investors make the right choices.”
“AI could solve questions about potential financial problems and solutions,” said Cliff Auerswald, President of All Reverse Mortgage in the same World Finance article. “While human financial advisors do have some of the best options for financial solutions based on past experiences, AI can provide more research-based information on how people can succeed financially.”
Business leaders who maintain a focus on AI’s capabilities, limitations, and opportunities could see results such as an increase in both efficiency and customer satisfaction from the improved speed of service.
Next Steps for Keeping Up with Artificial Intelligence
Firms can stay ahead of the curve in AI adoption by taking these actions as more sophisticated, industry-focused AI solutions begin to emerge:
- Invest in data governance practices to ensure quality data is available for machine learning algorithms to process and analyze.
- Develop specialized teams or departments focused on implementing and enhancing AI technologies throughout the organization.
- Continuously evaluate AI solutions and their effectiveness, making adjustments as needed while keeping ethical considerations top-of-mind.
- Explore opportunities for collaboration with fintech firms that specialize in advanced AI applications.
- Provide ongoing training and support for staff to adapt to new AI tools and foster a culture of continuous learning and innovation within the organization.
Prioritizing Cybersecurity
With increasing scrutiny on data privacy and security, financial institutions must prioritize investments in cybersecurity measures to protect sensitive information and maintain client trust. “It takes 20 years to build a reputation and a few minutes of cyber-incident to ruin it,” as Stéphane Nappo of Société Générale describes. But according to KPMG, 40% of financial services companies have not experienced any improvement in performance or profitability from their investments in cybersecurity initiatives over the past two years.
To effectively protect against cyber threats, financial firms must implement a comprehensive cybersecurity strategy that integrates advanced technologies and data governance processes. This includes establishing robust protocols for data encryption and access control, continuously monitoring for vulnerabilities, and conducting regular training for employees to recognize potential threats.
Insider threats are also a significant concern in the financial industry, as malicious actors with internal access pose a significant risk to sensitive data. “We discovered in our research that insider threats are not viewed as seriously as external threats… but when companies had an insider threat, in general, they were much more costly than external incidents,” said Dr. Larry Ponemon, Chairman and Founder of the Ponemon Institute.
To mitigate this risk, firms should implement thorough training programs and regularly review and update access protocols. Additionally, establishing a culture of cybersecurity awareness and accountability can also help prevent potential attacks.
By fostering a culture of resilience that emphasizes proactive measures, firms can not only safeguard their operations but also reinforce client trust. A commitment to data security ensures clients feel confident in the protection of their sensitive information, thereby solidifying long-term relationships and enhancing the institution’s reputation in an increasingly digital landscape.
Next Steps for Prioritizing Cybersecurity
Firms can take steps now to enhance their cybersecurity posture and protect against both external and internal threats. These include:
- Conduct regular risk assessments to identify potential vulnerabilities and prioritize areas for improvement.
- Implement advanced technologies, such as AI and machine learning, to detect and respond to cyber threats in real time.
- Train employees on cybersecurity best practices and regularly review access protocols to prevent internal breaches.
- Establish clear data governance processes, including encryption and secure data storage measures, to protect sensitive information.
- Foster a culture of accountability and awareness around cybersecurity within the organization, from top-level executives down to entry-level employees.
Improving Client Experiences
“We’re witnessing the creative destruction of financial services, rearranging itself around the consumer,” says fintech expert Arvind Sankaran. “Who does this in the most relevant, exciting way using data and digital, wins!” This means centering technology investments on client experiences and outcomes, rather than internal efficiencies and data management alone.
Financial services firms must therefore shift their focus from simply acquiring new technologies, to strategically deploying them in ways that enhance client experiences and drive business growth. This requires a comprehensive understanding of the customer journey and a data-driven approach to anticipate and meet evolving demands.
Improving client experiences also means staying ahead of regulatory changes and compliance requirements. This helps firms build trust with their client base and bolster their resilience as the industry evolves. As Stéphane Nappo of Société Générale notes, “It’s all about trust—the more digitally advanced we become, the more strategic digital trust becomes.”
Next Steps for Improving Client Experiences
Firms can take steps to enhance client experiences and build trust by:
- Conducting regular research and analysis to understand customer needs and preferences.
- Leveraging advanced technologies, such as AI and predictive analytics, to anticipate customer demands and personalize interactions.
- Investing in user-friendly digital platforms that enable seamless transactions and easy access to information.
- Staying up-to-date on regulatory changes and proactively implementing compliance measures.
- Building a culture of transparency and ethical practices within the organization to foster trust with clients.
Create Your Path to Success
Financial institutions have a unique opportunity to innovate while enhancing cybersecurity and client experiences. By strategically leveraging technology and fostering a culture of trust and accountability, your firm can not only navigate challenges but also thrive in a competitive landscape. Embracing these principles will pave the way for sustained growth and resilience as your digital transformation efforts continue.
Partner with Option One Technologies for Your Digital Transformation Initiatives
Partnering with a reliable technology provider is crucial for staying ahead of the competition. Contact us today to discuss how we can support your digital transformation initiatives and enhance your business success.
