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Pandemic Accelerates Digital Transformation

Financial services firms want to invest in cybersecurity and privacy, cloud and data analytics next year but also to use technology to accelerate innovation initiatives.

The findings come from a Deloitte Center for Financial Services’ survey of 800 senior executives on what 2021 will hold for financial institutions.

Jim Eckenrode, managing director of the Deloitte Center for Financial Services, said in an email: “The pandemic has clearly accelerated digital transformation, but not in equal ways across the industry.”

He explained in a podcast that financial institutions are continuing to focus on cost which could potentially  include continued rationalization of compensation and headcount and implementing technology to enhance efficiency.

Source: Deloitte

“There is a real focus on investing in cybersecurity and privacy, cloud and data analytics and interestingly enough, also accelerating innovation initiatives,” Eckenrode added. “There’s a sense here that we’re repositioning some of our cost savings toward the future and toward anticipating where we think we might be successful in the coming years.”

Monica O’Reilly, national industry leader for financial services with Deloitte & Touche LLP, agreed on the podcast that the pandemic accelerated digital transformation.

“More has been realized in the last seven to 10 months than the prior five years,” she added. “That’s something we’re going to see much more careful planning around at all institutions, regardless of which sector they’re in.”

Eckenrode continued there are regional differences for technology priorities although cybersecurity, privacy and cloud are a high priority everywhere. There is less emphasis on spending on analytics and digital channels in Europe than in the US and in Asia. In addition, Asian respondents were the most bullish on increasing spending for blockchain and robotic process automation.

Working from home

The podcast also discussed the shift to remote working as a result of the lockdowns during the pandemic. Although financial institutions adapted rapidly and the process was smoother than expected, there were some challenges.

Jim Eckenrode, Deloitte

Eckenrode said: “In capital markets and investment management, there were challenges around opening new accounts that required wet ink signatures and along with that, printing documents at home that really was not something that was allowed. “

Other challenges related to operational controls and monitoring of people’s activities.

Social responsibility

O’Reilly highlighted the increased interest in corporate social responsibility around the globe since the pandemic, including what organizations are doing themselves and how they are looking after their workforce.

“There’s an expectation around disclosures,” she said. “There’s an expectation around how sustainability is being built into risk models.”

More than half of respondents to the survey said their institutions were increasing their focus on sustainability.

Monica Reilly, Deloitte

“I want to illuminate that last point, because it’s not only a matter of doing good for society, but there is also an untapped market for products and services that have been discussed by banking institutions for a number of years, but not been addressed,” added O’Reilly.

For example, financial firms could use alternative data and analytics to help underwrite loans for people with thin or no credit history.

Eckenrode added that executives have committed funds and made statements about climate change, diversity and inclusion.

“The US Commodity Futures Trade Commission recently published a report looking at the implications of climate change on the financial services industry,” he said. “We’re really seeing a significant momentum shift.”

O’Reilly concluded that the industry has an opportunity to reshape a human-centered capitalism.

“I’m very hopeful from what we’re seeing, that this is going to be the beginning of a different age driving a meaningful social and environmental change,” she said.