The Surprising Factor Financial Firms Need to Invest in To Accelerate Growth

By Marianne Brown, COO, FIS

Financial services has always been competitive when it comes to talent. Headlines blare when a team is “poached” or a top trader leaves. But when it comes to people, a firm’s success relies on more than just the top contributors to the bottom line.

That’s one of the key findings from our 2018 Readiness Report which gathered feedback from 1,500 senior decision-makers at financial services firms around the world. What we actually found is that firms that are prioritizing investments in digital expertise are growing nearly twice as fast as their peers.

Why is digital so important? As revenue models across the buy side, sell side and insurance come under threat, firms have to invest in the areas that accelerate growth. And our analysis finds that a comprehensive digital innovation strategy has a close correlation to growth.

Addressing the human side of the strategy makes sense. In fact, 22 percent of executives say organizational culture is one of the biggest barriers to digital innovation, while 15 percent point to an insufficient understanding of digital issues. Another 14 percent cite talent gaps.

The top performing firms understand this, and they’re already taking action: recruiting for new digital skills, appointing leadership roles with an innovation remit and encouraging a more open and innovative culture across functions. By contrast, the rest of the industry has been more varied – and less intensive – in its approach to digital innovation.

This new approach highlights that the rest of the industry doesn’t fully understand the transformational value that digital innovation brings. Used to traditional industry business models and ways of working, these institutions can be slow to recognize the full extent of the opportunities and threats brought about by emerging technologies like blockchain and artificial intelligence (AI).

Some firms are also adopting new senior leadership structures to help direct their efforts. For example, HSBC set up a technology advisory board comprising CEOs, scientists and entrepreneurs from China, India, Israel and the U.S. to help steer its digital strategy.

Others are turning to the tech sector to acquire digital expertise. Goldman Sachs, for instance, recently recruited the former head of Amazon Web Services’ AI laboratory to spearhead its AI strategy.

But vying for tech-sector talent brings new demands: to compete with practices in high-tech firms in Silicon Valley, for example, BlackRock has introduced a new flexible vacation policy for its employees.

The cultural aspect of a digital innovation strategy is also central. As financial services firms bring new ways of working and new business models into play through digital innovation, they will need to adapt performance management practices and incentive structures.

For example, the real pay-offs of emerging technologies such as AI and distributed ledger may be some years away, so different success measures may need to be applied for top talent in these areas – rather than short-term metrics based on financial performance.

So what should firms do in this new eras? To put it simply, remember the people side of digital innovation.

A digital innovation strategy will increasingly separate the industry’s winners and losers. The top performers are putting significant energy into getting the right expertise at the leadership level to help oversee innovation projects and identify which emerging technologies to pursue. They are also adapting their organizational culture to ensure the best outcomes from their innovation strategies.

To catch up, firms must invest in digital talent – whether that’s hiring expertise or working with innovative partners – and create a culture that is truly open to new ideas. Only then will they be able to create new value for clients and move to the front of the pack.

Marianne Brown is the chief operating officer of FIS’ Global Financial Solutions (GFS) organization, which includes FIS’ banking, payments, and institutional and wholesale offerings for large financial institutions and capital markets globally.