The financial services industry is at a precipice. Now, while settling into changes that were rapidly introduced under pandemic settings, organisations are looking ahead to support customers through an extraordinary period of change.

Priorities and plans identified over the coming months will shape the entire nature of the industry in the future.

Last year, when we surveyed our financial services clients, they identified multiple pressures: fast tracked digital agendas, changing workplace and macroeconomic concerns, the fallout from the Royal Commission and ongoing regulatory burdens.

In this year's survey, many of those challenges remain. Regulatory requirements are demanding and complex. Retaining and acquiring talent is a challenge. And digital transformation is even more of a focus. Organisations identified its risks as a major concern, as well as the impact of crypto changes and big tech.

Despite their concerns though, financial institutions have a strong focus on making their customers' and the community's experiences better. Two means to this end are technology and ESG considerations.

We explore the key findings our survey identified.

Financial Services in Focus survey findings

Finding 1: Financial institutions' focus on technology is primarily to make their customers' experiences better

In last year's survey, 92% of respondents found that their customers had increased their interaction with their existing digital platforms since March 2020 – and a third of respondents said significantly so.

This year, customers continue to be the focus as organisations take the next steps in their digital transformation.

When considering what would give financial services organisations a competitive advantage for consumers and investors, the largest group identified service affordability and accessibility as most important – 31%. And according to our research, technology is central to that.

70% said that, in order to give them a competitive advantage, they would like to streamline existing systems. Investing in new technology or developing their own was also a priority.

In addition, of those who said they were looking to invest in new technology, 86% said they are interested in automating processes, 71% in streamlining customer experiences and 64% in making customer or employees' experiences more mobile.

"For financial services organisations, technology is fundamental in transforming and enhancing customer experiences – and the journey is only just beginning. Key to this is driving change in customer behaviour. Building trust, protecting privacy and safeguarding against cyber risk are critical ingredients." Michael Lawson

However, technology's risks are also a key concern for financial services organisations.

This relates to existing systems, with 70% saying outdated or legacy systems are one of their organisation's greatest challenges. 71% of those who plan to invest in new technology said they aim to use it to phase out legacy systems. And of those who said they had been through a M&A transaction over the last 12 months, 50% said technology integration or separation posed unexpected challenges.

Cyber security is also a major concern for organisations, with 58% saying it is one of their greatest challenges.

Finding 2: ESG is a critical focus, and becoming more prominent

The expectation for organisations to focus on environmental, social and governance concerns is growing – with 100% of all respondents saying that stakeholder expectations have increased.

58% of respondents said that achieving net zero targets is a concern. Organisations are putting resources and action behind it, with 56% saying they have sustainability and climate policies, 53% saying they have publicly stated net zero emissions targets and 50% saying they have sustainability and climate change reporting.

"Organisations face ongoing, evolving regulatory requirements as ESG concerns move from the fringes of Board, executive and auditor consideration towards the core." Sarah Barker

Organisations demonstrate their commitment to ESG in a range of ways.

Finding 3: Organisations expect cryptocurrency changes and big tech to have significant impacts

63% of respondents said they expect to see changes and reviews around payment systems and cryptocurrencies over the next 24 months.

Respondents also predicted that competition from new entrants (such as fintech and buy now pay later services) and from non-financial players (such as big tech) would increase over that period.

"With the government taking steps to regulate cryptocurrencies, digital assets and fintech in Australia, they are becoming increasingly mainstream and influential in the financial services sector." Richard Batten

Finding 4: Regulatory burdens remain a significant concern

Keeping up with the pace, volume and range of changes, as well as having the resources to meet new regulatory obligations, remains a challenge for our survey respondents from year to year.

48% of people said they are concerned that increasing regulatory demands will have a detrimental impact on their organisation's ability to benefit from an economic bounce back. The Royal Commission's impact is still being felt: 36% said they had more focus on Royal Commission recommendations since the start of the pandemic, while 42% felt it remained the same.

In terms of which specific regulation organisations found to be the most challenging, over half said breach reporting (55%), but several dominated:

Organisations are also looking for tools to help make regulatory compliance simpler. For example, of those of who said they are planning to invest in new technology, 57% said its objective was to create easier or more streamlined regulatory compliance.

"Our data indicates that managing regulatory demands is an ongoing concern – and organisations are looking for ways to do it better. The most successful organisations are looking beyond mere compliance, but are taking a holistic view of their regulatory obligations and considering how they can make a meaningful, positive impact." Michael Lawson

Finding 5: Respondents said renewable energy and health have the greatest investment potential – but technology (fintech and regtech) also dominated

Respondents identified a range of sectors with high investment potential. Renewable energy ranked highest at 59%, but was closely followed by healthcare and fintech.

This reflects the community's focus and values, as organisations look to mitigate the impact of climate change and pay close attention to reshaping healthcare as a result of the pandemic.

Regtech also ranked high, with 34% of people identifying that it had great investment opportunities – illustrating the potential for technology to ease organisations' regulatory burden.

In addition, 53% of respondents expect to see industry consolidation over the next 24 months, which may shape investment trends.

Finding 6: Retaining and acquiring talent is a critical issue – and flexible and agile working is key to that

35% of respondents said that retaining and acquiring talent was the most important employee-related issue for their organisations. This was followed by a safe return to offices (33%) and increasing employee engagement (18%).

Last year, 84% of respondents said that working remotely had not impacted their interactions with customers and suppliers and standards of conduct. This year, that success is reflected in the fact that almost all organisations now have flexible working arrangements (94%) as means to attract or retain talent.

36% said they are considering downsizing office space as a result of successful agile working arrangements – up from 14% in last year's survey who had already downsized – while 41% said they aren't, but might in the future.

The changing nature of workplaces is also reflected in organisations' search for talent, with 33% of respondents saying that hiring new people with diverse skillsets would give them a competitive advantage.

Next steps: a further focus on the findings and implications

There is a lot to unpack in these results, and many issues to explore further. Bringing together our cross section of experts from across the firm, we will dive deeper into each of the findings, looking at what they mean for clients and how organisations can manage risks and take advantage of the opportunities.