Technology departments in financial services firms are unable to innovate with technologies like Artificial Intelligence and Blockchain because they have lost influence in boardrooms, according to leading Information Technology (IT) executives working in the financial sector.
A survey of over 200 European IT decision makers commissioned by Excelian, Luxoft Financial Services reveals that 86% of respondents have recently championed a major digital project that failed because it did not get past the boardroom. IT executives believe misconceptions about technology by executives are partly to blame for these failures – 78% agree that senior executives do not understand technology and 81% are frustrated by unrealistic demands to innovate with new technologies whilst also having to cut costs.
Excelian, Luxoft Financial Services – the financial services division of Luxoft, a global consultancy and IT service provider – today published Confessions of a CIO, a report which reveals the biggest frustrations of IT executives working in capital markets, wealth management and corporate banking in the UK, Germany, Austria and Switzerland.
The report shows IT executives working in the UK are particularly frustrated by senior colleagues being unable to grasp new technologies – 85% of respondents in the UK agree that senior executives do not understand technology well enough, compared to 76% in Germany, 75% in Austria and 87% in Switzerland.
With a lack of understanding of technology, comes unrealistic expectations about how it should be implemented. 81% of respondents are frustrated by unrealistic expectations from the C-suite, with 22% going further by saying a lack of support from senior executives keeps them awake at night. As such, IT professionals are not being given the tools they need to innovate and some financial institutions are being left behind in the digital revolution by faster acting competitors.
“Tensions in financial services IT departments are reaching boiling point,” said Roman Trakhtenberg, Group Managing Director and Global Head of Excelian, Luxoft Financial Services. “Technologists in finance want to be the gateway to the innovation but right now they are unable to influence decisions at the top. Instead, IT professionals in finance are stuck dealing with internal legacy systems and imminent cyber-risks, and are not getting the support they need to implement real change.”
The report also shows that although top executives want the company to innovate with technology and most understand its importance to the business, IT departments remain underfunded. 85% of respondents say that the CEO understands the importance of technology within the business, but 78% are frustrated by a lack of IT investment – 31% also say budget cuts keep them awake at night. UK based respondents working for small to medium sized financial institutions were particularly frustrated, with nearly all (97%) agreeing they needed more investment – whereas only 76% of UK respondents working for larger firms expressed the same frustrations.
The case for increased IT investment at banks in Europe was recently strengthened in September as the European Commission announced it is looking at ways to treat expenditure on IT systems as a cost rather than investment – meaning IT spend may no longer be deducted from banks’ capital ratios when calculating capital requirements, which may free up additional budget. This could be a particularly important EU initiative as 75% of respondents today are frustrated that technology is treated as a commodity by the business, meaning they believe financial institutions do not take into account the future value of technology and see it only as a cost when looking at their balance sheet.
Despite this, Confessions of a CIO shows that mounting pressures on IT departments, including cost saving initiatives since the financial crash, mean IT leaders have lost the ability to innovate. IT executives are unsure about how to encourage more innovation, but 41% believe a change in their businesses culture is needed in order to embrace digital innovation. Half of German-based respondents say their business needs a cultural change – only 43% of Swiss-based respondents, 37% of UK-based respondents and 35% of Austrian-based respondents agree.
“It is harder than ever working as an IT executive in a financial institution,” explained Roman Trakhtenberg. “They are underfunded, underappreciated and are often not taken seriously by their non-technical senior colleagues. CIOs and technology leaders need to strengthen their hand in the industry if we are to finally propel the financial sector into the digital age.”