Digitalisation and automation top focus for financial firms in 2024

Research into the UK financial services sector reveals nine-in-10 firms reported increased revenues in the last 12 months. As they look to build for growth, digital technology and automation are key investment priorities for 2024.

The last year has seen an ever-growing mound of research, suggesting AI and its associated technologies are the key to unlocking untold wealth in the financial services sector. Some studies suggested the UK’s economy could get a much-needed £31 billion boost from the widespread adoption of generative AI, with the technology boasting the potential to increase UK productivity by 1.2% each year. And hype around generative AI and machine learning soon buoyed economic sentiment across Europe, with fewer than two-in-five financial services CEOs expecting a severe downturn in the coming year.

With this in mind, it is little surprise that UK financial services firms have identified digitalisation and automation as their leading priorities for both business strategy and investment in 2024 and beyond. A new survey from Johnston Carmichael has polled 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, and has found a growing focus on technology across the sector.

With 92% of the financial services companies reporting increased revenue over the last year, following interest rate rises and expansion into new markets, the study found that the sector is doubling down on technological investments looking ahead. In particular, when asked about the areas their business strategy would focus on in the next 12 months, respondents ranked digitalisation as their highest priority, with 26% citing it as a priority, followed closely by automation at 25.7%.

This was even higher in certain sub-sectors of the market. Looking ahead over the coming two years, a 32% chunk of fintechs said they considered automation of processes to be the most important area of investment – while upgrading technological systems to accommodate those changes was ranked highest by the same number. But it was not only the tech-based sub-sectors where this was true. The largest portion of 34% of retail banks said improving their systems and processes was a priority for the next year, while 26% said that technological innovation and improving workforce skills to make the most of it were crucial.

Commenting on the findings, Ewen Fleming, head of financial services at Johnston Carmichael, said, “Our survey represents an insightful snapshot of the UK Financial Services sector today. 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. 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.”

Fleming added, “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. While change remains a constant for the sector, financial services organisations are planning ahead with renewed confidence and ambition.”

As well as finding new opportunities, financial services firms are also using automation and technology as a means of saving money to safeguard their bottom lines. Of those surveyed, 36% said their organisation had used automation to control costs over the previous 12 months, with 35% also selecting digital adoption as a key driver of efficiency. Meanwhile, automation ranked most highly when asked about future cost control measures, with 34% citing it as key to their plans over the next 12 months.

Again, this rose higher in certain sub-sections. The corporate and investment banking segment, for example saw a 40% chunk turn to automation for cost-control measures – while an even higher 42% deployed digital adoption to that end.