- New research by international law firm CMS finds compliance is the biggest single factor affecting technology adoption across the financial services sector
- Resistance to change and lack of in-house skills present the greatest barriers to digitalisation in the sector
- Expected future risks come from new technologies that are generally not well understood, including blockchain and Artificial Intelligence (AI)
18 October 2022 – Regulatory compliance has the biggest single impact on the adoption of new technologies in the Financial Services (FS) sector, international law firm CMS has found in its Technology Transformation survey.
Alexander von Bossel, Partner at CMS, said: “The FS sector is at a crossroads, with traditional firms often having a vast number of legacy systems in place which are particularly difficult to replace or upgrade.
“With technology becoming increasingly complex, technical failures, vulnerability to cyber-attacks and the risk that these systems do not meet customer needs grow proportionally.”
Angela Greenough, Partner at CMS, added: “Firms may have no choice but to face the challenge of upgrading, but in addressing it, they will also reap the wider benefits of new technologies.”
The survey of 85 senior counsel and risk managers across the FS sector found that risk managers remain engaged with digitalisation, citing the top drivers for adoption to be a response to regulatory requirements (40%), M&A (38%), customer demands (31%) and the adoption of transformational new technologies such as AI (31%).
The study shows that the expected future risks are different to those FS firms face today. The FS sector is currently most concerned with risks related to compliance and regulation (73%), IT performance (62%) and cyber breaches and data security (51%). The risks that FS firms expect to see in the future, however, include AI (56%), smart contracts (53%) and cloud migration (53%) – new technologies that are generally less well understood
When it comes to addressing these risks, respondents cited internal resistance to change (54%), lack of in-house skills or expertise (52%) and lack of budgetary sign-off (49%) as the primary obstacles to minimising technology-related risks.
Von Bossel concluded: “Every sector faces emerging threats, but for FS firms, greater risks may lie in inaction rather than action.”
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