Private equity behind the curve in adoption of new technologies

11 July 2018 4 min. read

The financial services sector is under increasing pressure to become more technologically driven to navigate changes in customer preferences, the constantly shifting regulatory landscape as well as to fend off digitally native challenger banks. Whilst most financial institutions have made steady progress on their path to becoming more tech savvy, certain areas such as private equity, however, have been behind the curve in their adoption, writes Pankaj Gupta, Managing Director at Synechron.

Private equity as a whole has been slow to embrace technological change, but this may be changing. A recent survey by fund administrator Augentius found that more than 55% of private equity firms are looking to make investments in technology a priority for the next year. This certainly is a positive sign for the sector, but it’s important that they follow through on their promise, as failure to do so could leave them falling behind their financial services peers.

Technology as a solution

It is no secret that technology can solve many of the problems facing the financial sector today. Whether it’s applying optimal character recognition (OCR) to ease the burdens of regulatory compliance, introducing Natural Language Processing (NLP) into client onboarding processes or adopting machine learning to help with reporting, technology is changing the way financial institutions operate.

If regulation is taken as an example, there are currently over 750 global governing bodies looking at different regulations. With each of these regulations consisting of thousands of pages and filled with numerous clauses, compliance is more time-consuming – and expensive – than ever before. As a result, it is expected that financial institutions are expected to spend 10% of their total revenue on compliance by 2022.

Clearly, steps need to be taken to ease this burden. By applying sophisticated and specifically designed technologies, firms can simplify many of these processes in order to streamline their operations and ensure compliance. 

Private equity behind the curve in adoption of new technologies

Gaining a competitive advantage

Financial institutions are already benefitting from the implementation of new technologies. By automating what were previously manual processes, firms can free up resources to focus on the areas that generate the greatest revenue – an increasingly important factor in today’s saturated marketplace. Not only is this shift happening internally, but also externally, with customers benefitting from increased levels of customer service as firms adopt new technologies in this area. All of this is relieving pressure from the firm’s bottom lines.

With such important benefits on offer, those who don’t prioritise investment in technology risk getting left behind. After all, if a firm’s competitors are able to implement cost saving initiatives, focus more time on generating business revenue and improving client experiences, it won’t be long before those that haven’t invested start to feel the pinch. 

However, it’s important to remember that to make the most of new technologies, businesses need to take a holistic approach that goes beyond monetary investment. When implementing new technological processes, firms need to take the time to assess their current situation, considering what could be done more efficiently and which areas of the business will benefit most from this investment. At this point, firms can assess which applications are best suited to solve each challenge, before deciding on the best technology to apply. 

To succeed in today’s increasingly competitive marketplace, it is important that financial institutions consider the options that can help them get ahead. Fortunately, technology is helping to ease many of the problems facing the sector today, but only for those who embrace it. To stay relevant, it’s therefore vital that all parts of the financial services sector invest in technology, as those who don’t do so risk being left behind.

Pankaj Gupta is head of Synechron's UK business consulting team. Synechron is a consultancy and technology firm for the financial services industry.