Digitalisation and automation to be top focus for UK FS firms in 2024, according to new survey

Ewen Fleming (Johnston Carmichael)

UK FINANCIAL services firms have identified digitalisation and automation as their leading priorities for both business strategy and investment in 2024 and beyond, according to a significant new survey of opinion formers in the sector.

UK top 10 accountancy firm Johnston Carmichael surveyed more than 250 senior executives at UK-based financial services firms spanning retail and SME banking, corporate and investment banking, insurance, wealth management, and fintech firms or sub-sectors.

The research found that 92% of the financial services companies responding have reported increased revenue over the last year, following interest rate rises and expansion into new markets.

Economic instability, cybersecurity and sustainability were identified as the greatest challenges facing the industry in the coming months.

The findings also highlighted a growing focus on technology across the sector.

When asked about the areas their business strategy would focus on in the next 12 months digitalisation ranked highest with more than a quarter (26%) citing it as a priority, followed closely by automation (25.7%).

Just over three in 10 respondents said the main opportunity for their firm over the next year is improving systems and processes, while just over 28% chose technological innovation.

These preferences were borne out by the respondents’ investment intentions with more than a quarter (29%) identifying automation of processes as their most important area of investment over the next 24 months, followed by upgrading technological systems at 26%. Respondents referenced sustainability and improving efficiency as other driving factors behind their investment plans.

Technological solutions emerged as central to cost control.

More than a third of those surveyed (36%) said their organisation had used automation to control costs over the previous 12 months, with almost the same again (35%) selecting digital adoption as a key driver of efficiency.

Automation ranked most highly when asked about future cost control measures, with more than a third (34%) citing it as key to their plans over the next 12 months.

Ewen Fleming, Partner and Head of Financial Services, Johnston Carmichael, said:”Our survey represents an insightful snapshot of the UK Financial Services sector today, and also offers a valuable perspective on the trends we can expect in 2024 and beyond.

“Firstly, it’s welcome that 92% of firms responding have increased revenues over the last 12 months, in part reflecting the return to a higher interest rate environment.  This is particularly notable given the post-Covid market turbulence and the clear challenges posed by cost of living and inflation.  Organisations have delivered strong commercial performances whilst also raising standards for their customers through initiatives such as the new Consumer Duty.

“But it’s also clear there are still tough times ahead, and the survey signposts a desire to invest in the infrastructure and capabilities required for future trading conditions. Adopting greater automation and digitalisation will help to improve efficiencies and enable UK firms to remain competitive amid ongoing economic uncertainty. Organisations are aware that they will need staff with the appropriate digital skills to manage new systems and protect their own and their customers’ cybersecurity.

“Perhaps most notably, the intent to operate sustainably is demonstrated by the importance placed upon meeting net zero requirements as part of the reporting and regulatory landscape.  Whilst change remains a constant for the sector, financial services organisations are planning ahead with renewed confidence and ambition.”

Debbie Walker, Chief Risk Officer, Tesco Bank, added: “This report demonstrates our financial services sector is thriving, which is good news for our economy and the customers we serve. Our sector has shown great resilience in recent years, and this attribute will be important to meet an evolving set of challenges. Collectively we have a key role to play, whether it’s meeting the changing needs and digital requirements of our customers, responding to an uncertain economic environment, or playing our part in managing climate risk and driving for net zero. The culture of customer support within our industry, which was further strengthened during the pandemic, gives us a solid foundation to meet the requirements of the new Consumer Duty regulations. The overall outlook is positive, and we have many opportunities which can be met through continued investment in our capabilities, our people, and our technology.”

All respondents to the survey are at C suite or senior executive level and represent a cross section of sub-sectors across the UK.

More than three quarters (76%) of firms who took part had at least 100 employees, and 42% had a turnover of at least £100m.

Other findings from the report include that almost six in 10 believe that the global economic recession will have a negative impact on their business for the next year or two.

Almost three quarters were positive about the UK’s regulatory framework and 80% were ready for Consumer Duty but almost a third will be prioritising internal training and education around the rules, suggesting that there remains a lack of knowledge and understanding among workforces.

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