Our survey found that only 38% of financial services leaders are confident in their ability to make data-informed decisions in real time. Workday’s Pete Rutman discusses what this means for the industry and its digital growth.
Digital wallets, mobile payments, and cryptocurrency are just a few of the innovations that have recently transformed the financial services industry. Driven by the breakneck changes in digital behaviors and how customers engage with their banks, digitization has demanded companies reshape their portfolio of products and services.
This effort is driving long-term revenue growth—with 60% of industry leaders expecting at least half of their revenues to be digital within three years. That’s according to “Closing the Acceleration Gap: Toward Sustainable Digital Transformation,” Workday’s global survey of 1,150 senior business executives, 129 of whom work in financial services. That figure is up from 51% in 2020.
Despite this positive expectation on revenue, our study found that digital acceleration has hit a speed bump. Sixty-two percent of financial services executives say the pace of digital transformation has either already slowed from where it was a year ago or that they expect it to slow down in the future. And 44% say their digital strategy is often or always outpaced by the demands of the business.
Financial services organizations are scrutinizing every potential investment as recession concerns continue to grow. They’re measuring three times before they cut, and nothing is approved unless it will significantly decrease costs, grow revenue, or reduce risk.
Almost half (47%) of financial services executives see a growing gap between their business performance today and the development needed to compete tomorrow.
Where do financial services leaders think they’ll get the biggest bang for their buck? Looking ahead, they see three top opportunities for digital growth in the next 12 to 18 months:
Volatility and disruption demand agility—but to make strategic decisions, leaders need real-time, reliable data.
On the financial and operational side, it comes down to the analysis of what’s actually selling and how profitable it is. Are we investing in the right areas of our business and able to capitalize on those areas?
Unfortunately, almost half (47%) of financial services executives see a growing gap between their business performance today and the development needed to compete tomorrow. That’s partly because they lack the data they need to respond quickly to change.
Four in 10 financial services executives say that data is somewhat or completely siloed, with only 14% reporting that data is fully accessible to team members who need it. And nearly 2 out of 3 (65%) say they need technology to better integrate data between disparate systems.
Just as connected data enables a swifter, more adaptable response, the lack of such data hampers companies: Nearly half (49%) of financial services executives say their inability to connect operational, people, and financial data to business outcomes impairs the organization’s agility. And among financial services CFOs, the survey found that only 38% are confident in their ability to make data-informed decisions in real time.
Flexibility will be fundamental as digital technology continues to reshape the financial services sector.
Connected data is also critical to predicting future business needs, informing how product portfolios may have to evolve to help the company stay competitive—capitalizing on what the company is doing today and including other non-product-related areas.
However, only 30% of financial services executives are confident in their ability to model multiple scenarios. By unifying data in one system, executives can create a single source of truth that can inform their business decisions. This enables greater collaboration while also providing higher quality data—both of which are needed to drive better business outcomes.
Financial services companies need connected data to define a successful growth strategy—and to properly staff the teams that will execute it.
Companies must ask, do we have the right people and do we have them in the right spot? Do we have the right skill sets to actually achieve the revenue goals that we set?
In the survey, financial services executives identified three top skills that help their teams meet the needs of the business:
It’s no surprise that data and analytics skills are in demand, given executives’ overall focus on accessing more reliable and insightful data. They’re looking for people who can apply judgment to disparate data, ranging from product profitability to regional trends to macroeconomic factors.
Within the industry, there’s inherent complexity. A massive roll-up of data is needed to ultimately make a decision as to which direction the financial services company will pursue.
From that decision point, financial services companies need people who can develop and embed new revenue streams. That starts with obtaining data from front office systems and understanding the profitability of certain products. But leaders are looking for people who can translate that information into marketable solutions. Teams need to be able to derive real-time insights from market shifts and use predictive analytics to see how rollout plans may need to change accordingly.
Financial services executives also need people who have an advanced understanding of regulation and compliance—whether it’s IFRS (international financial reporting standard) 17, LDTI (long-duration targeted improvements), or new ESG (environmental, social, and governance) rules—and who can help them anticipate and respond to shifts in reporting requirements.
44% of executives say their digital strategy is often or always outpaced by the demands of the business.
It’s increasingly important for organizations to adapt quickly to regulatory requirements. They need to be able to rapidly access the data and respond without spending millions of dollars.
Each of these skill sets is critical to help financial services companies compete. However, 39% of execs say their teams lack the skills they require to meet the needs of the business. Matching people with the right skills to the right jobs faster and more effectively will require an evolution in how organizations operate.
Companies must identify who in their workforce has these skills, and that’s an ongoing journey. First, the system must be able to analyze your workforce and produce actionable, strategic insights. Second, you need to implement the system and put it into action. And third, you need the entire organization to take a more skills-based approach.
Flexibility will be fundamental as digital technology continues to reshape the financial services sector. Yet many banks and insurers are bogged down with multiple operational systems, each with different data formats and structures. When these stand-alone systems transmit data to the general ledger, they do so through varying data files, finance dimensions, and levels of detail—creating complexity that’s at direct odds with the speed and adaptability companies need.
Connected data can help leaders respond to changes faster and make more informed decisions, but investment isn’t keeping pace with the opportunities leaders see on the horizon. Among financial services CFOs, less than one-third (32%) say they’re prioritizing technology to break down data silos and integrate data between disparate systems. And just 14% say they’re prioritizing technology to unify financial, people, and operational data.
Companies that fail to update their IT infrastructure and adopt cloud-based technologies may struggle to compete as the digital market picks up pace. But those that do adopt cloud-based technologies and create a single, unified source of real-time data have an opportunity to transform the way their organization operates. Think: automated finance and accounting processes, real-time consolidation for a faster close, and the power (and time) to run advanced analytics, unlocking rich insights from accounting subledgers, for instance.
Simply “moving to the cloud” is not enough. When modernizing systems and extending further into other cloud applications, the data should flow seamlessly and effortlessly between those systems.
Of course, connecting a company’s data won’t happen overnight. Leaders can start with the data that will do the most to increase efficiency and reduce costs in the short term, while also looking for opportunities to connect data in a way that will drive both process and product innovation.
While many companies have already started their cloud journey with human capital data and payroll, many leaders are now thinking about how they can see similar successes with finance and operations. Companies are looking to apply some of the same logic and benefits that they’ve received from modernizing to other aspects of their business.
Finance, IT, and HR leaders around the globe talk with guest host Megan Wright of Longitude, a Financial Times company, about Workday’s latest research, “Closing the Acceleration Gap: Toward Sustainable Digital Transformation,” and the most pressing business issues they face.
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