Capital markets: Top 4 barriers to digital transformation

The 2018 CGI Client Global Insights based on in-person interviews with 1,400 senior business and IT executives across the globe demonstrate a continuing need to pursue their digital transformation agendas to meet the rising expectations of digital customers and citizens. Capital market executives reveal their top four challenges as cultural change and change management (83%), followed by regulatory compliance and cybersecurity concerns (81%), technology/legacy/agility constraints (75%) and data management/control (74%).

Interestingly, these are the same four challenges cited in 2017. Cultural change and change management remains in the first spot year-over-year, while regulatory compliance moved up from the fourth to second spot. Does that mean progress is or that the journey is much longer than we thought?

New talent, ways of working and technologies key to overcoming challenges

Capital market firms can overcome these challenges but not overnight. Firms must adopt multi-year, incremental strategies deployed over the longer term. Key success factors include refreshing talent across the board, dismantling traditional management hierarchies, and developing new ways of working. New talent is required to drive business model transformation, challenge current practice, introduce advanced technologies, modernise legacy systems and increase agility

Acquiring and retaining digital talent and building the right culture is not only a new IT priority cited by executives in 2018, but also shot straight to the top of the list. There is a real sense of urgency among capital market executives when it comes to positioning their businesses for the future, and they understand how crucial talent and culture are to success.

In addition, there is a tremendous need for continuous investment in technologies. Specifically, firms that redesign their IT strategies to overcome these challenges will move to the forefront. However, achieving this in the face of tougher regulation, increasing cost pressures, aggressive competition and tight margins is a difficult task.

The threat of disruption also impedes technology investment. This threat comes more from insiders within the industry than from outsiders. The complexity of the business, the regulatory burden and the required investment in people and technology presents a significant barrier to entry for true outsiders.

Insiders, particularly those with scale, can afford to invest in new technologies to challenge their slower and smaller industry competitors. The best hope for outsiders is to excel in distribution, offer an improved customer experience and provide better customer care.

Large majority have a defined digital strategy in place

Despite these challenges, 70% of capital market firms have a defined digital strategy in place, while 11% are starting to build a strategy. Of those with a defined strategy, 34% have launched, operationalised or are realising results from an internally focused strategy that extends across the enterprise, while 30% are at similar stages with an enterprise-wide digital strategy that extends to their ecosystem partners./

In addition, in contrast to other industries, there is strong alignment between business and IT executives when it comes to driving digital transformation. We can see this in how they are organising their businesses for transformation, with a wide majority of those interviewed jointly empowering the CIO and lines of business to implement digital strategies.

The CGI Client Global Insights reveal many more findings from our in-person interviews with capital market executives, as well as provide our perspectives on those findings. Request a copy of our capital markets banking report by posting a comment here, or contact me. I’d be happy to discuss the report and your own firm’s digital transformation challenges in more depth.