The Future of Finance Is Now

The majority (53%) of senior executives are expecting material improvements in the economic environment over the next year. 

When senior executives are asked to assess their own organization’s position for growth over the next three years there is a 24% decrease from last year in those that see their own position as strong, dropping to 40%. This correlates with a similar rise in those that view themselves as moderately positioned, recognizing that further efforts will be required to fully realize opportunities.

Repeating a trend seen in 2023, Singaporean (53%) and Swiss (53%) financial institutions feel the most positively about their own position for growth.

The top three areas identified to drive this progression are expansion into alternative asset classes, adoption of solutions based on distributed ledger technology, and embedded finance.

Geopolitical uncertainties rank as the biggest expected external challenge.

Senior executives identify artificial intelligence (AI), cloud, and data analytics as the key technologies over the next few years.

Although the implementation of AI ranks as the top technology priority for consecutive years, the ways in which senior executives anticipate it delivering the most client value have changed: Where last year we saw a clear preference for deploying AI in the value domain, this year, it has firmly shifted to a efficiency- and cost-led mindset (e.g. automated compliance, regulatory reporting).

Significantly, 99% of financial institutions anticipate using distributed ledger technology to trade at least one type of digital asset in the next three years.

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Consistent with the previous two studies, optimizing data capabilities is a core focus for senior executives. When it comes to the type of data that senior executives expect to increase their expenditure towards, ESG data has shot up in the rankings compared to last year, moving from fifth to first overall.

Nearly a fifth (19%) of senior executives cite greater availability/higher quality of ESG data as the key driver for growth in the ESG investing space, joint first with increased regulatory consensus (19%). It is the data capabilities and regulatory environment that are primarily driving growth at this stage of the development cycle for ESG investing, not the financial performance in the first place.

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Senior executives have varied takes on how their local capital markets can help local companies increase global competitiveness, with a geographic divide evident in the results: In Europe (i.e. UK, Spain, Switzerland), senior executives favor an emphasis on the distinct advantages of their local listing venues. Those in the US prefer creating incentives for long-term investments. Those in Asia are looking for increased regulatory harmonization (Hong Kong) or promotion of a broad product universe (Singapore).

The views on what are the most significant drivers for companies choosing to list on European exchanges differ significantly across geographies: For UK-based senior executives, the reputation of European exchanges is the top driver (39%). Spanish and Swiss respondents point to the liquidity available on secondary markets and the trading infrastructure, scoring 42% and 40%, respectively.

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The role of financial market infrastructure providers (FMIs) in supplying financial institutions with choice, support, and dynamic solutions to their challenges is ratified by the majority of respondents.

Senior executives reveal where the digital can complement the traditional, and how FMIs can play an active role in crystallizing positive expectations into success: A vast 89% of senior executives see distributed ledger technology (DLT) as being meaningful to their organization over the next three years. Nearly a quarter (24%) believe that it will be most meaningful when applied to post-trade, settlement, or clearing processes. 17% recognize the benefits of DLT in providing better data transparency and its usage in payments and cash services.

By providing a diversified set services, FMIs can empower financial institutions to anticipate and capitalize on emerging opportunities.