More than half of North American financial institutions that responded to a recent global survey conducted by Deloitte expect to increase their spending on cloud technology over the next year.
Almost 42% of all respondents of the Deloitte US Center for Financial Services survey anticipate bolstering investment in artificial intelligence (AI) technologies.
Financial institutions are looking for more flexibility and in order to innovate more successfully firms “will want to develop products and solutions cloud-first,” said Alaina Sparks, Deloitte’s US fintech and global financial services ecosystem and alliances leader.
“Having a cloud backbone will enable much more rapid development [for finance firms],” Sparks told FinLedger. “It will also be to [have] cost efficiencies, which I think a number of institutions, clearly, are looking for. Also, clearing technical debt will be important. But I believe the primary reason is the enablement of experimentation and successful execution of rapid innovation.”
The report asserts that cloud migration efforts, until now, were more focused on reducing cost, modernizing the tech stack and virtualizing the workforce. Looking forward, it argues that the promise of cloud technology may lie in helping banks rethink business models, be more agile and drive innovation.
The report also shows that 51% of respondents said their firms will increase spending on data analytics. Also, 47% percent of North American banks plan to implement technology that enhances efficiency over the next 6 to 12 months.
As for merger and acquisition activity, the report projects that fintech and digital lending M&A will only increase since fintechs will want to expand internationally and some may seek access to a banking license via a merger or acquisition. Banks may also look to acquire fintechs for their technologies and target new segments.
Sparks agrees there will likely be more M&A, partnerships and deals in general.
“I expect we’ll see a significant increase in funding around technology in general that supports or enables the financial services industry,” she said.
The COVID-19 pandemic has changed consumer behavior in regards to finance services, according to Sparks. For example, as we’ve previously reported, social distancing “has already driven further adoption of contactless technologies and digital experiences, points out Deloitte.
“Across the board, more people over the past nine months or so embraced digital interfaces — because of being fearful of contact with others,” she said.
According to the report: “The promise of digital banking was never fully realized, largely due to customer reluctance and/or a lack of attractive digital solutions. But the pandemic turbocharged digital adoption across products and demographic segments.”
As evidence of this, 44% of retail banking customers said they are using their primary bank’s mobile app more often, the survey found.
The report covers a global survey of 200 senior banking and capital markets executives in finance, operations, talent and technology. The respondents were equally distributed among North America, Europe and Asia-Pacific. The survey included banking and capital market businesses with revenues of at least $1 billion in 2019 and was fielded in July and August.