State Street: Investment Firms Must Embrace The '3 I's Of Data' To Remain Competitive

Feb 23 2017 | 9:39pm ET

Despite the rapidly accelerating pace of digital innovation in the financial sector, many investment firms remain digital laggards and are embracing new technologies slowly when compared to their peers, according to recent research from State Street.

The financial services and administration giant surveyed 2,000 investors and 500 investment providers for the research, compiled into a new report entitled Finance Reimagined: Finding Long-Term Value in a Digital Age

State Street’s research has identified three key approaches to data exhibited by financial services leaders - integration, intelligence and integrity. The company defines these "three I's" as integrating internal and external data; drawing intelligence from data to improve decision-making, agility and client-centricity; and safeguarding data integrity with the highest levels of cybersecurity.

The differences between the companies State Street identifies as leaders versus those considered laggards are striking. Highlights:

  • 64% of leaders are applying robust cybersecurity measures to ensure data integrity (vs. 22% of laggards)
  • 63% of leaders are aligning front, mid- and back office functions to better service clients (30% laggards)
  • 63% of leaders are fully harnessing data and analytics to improve decision making compared with just 24% of laggards
  • 63% of leaders have identified future areas of growth and new segments compared with 35% of laggards
  • 52% are focused on building an integrated, omni-channel approach, compared with just 24% of laggards

Firms in Europe identified the following as the most important success criteria for digital transformation:

  • 35% of firms value maintaining a culture that encourages innovation and collaboration (North America: 27%, Asia Pacific: 30%)
  • 29% of firms think organizing a high-performance digital team with dedicated digital champions (North America: 18% percent, Asia Pacific: 27% percent)
  • 34% believe acquiring the right talent and technical knowledge is critical for success (North America: 33%, Asia Pacific: 27%)

Of the investment providers surveyed – a group ranging from universal banks and mutual funds to alternative investment firms and fintech start-ups – almost half (49 percent) say technology is redrawing the marketplace. Eight in ten (81 percent) say digital transformation is important for the future of their organization.

State Street’s report also outlined a number of steps digital laggards need to take to accelerate their adoption of a digital future. These include:

  • Redefining technology talent by looking outside of their industry for the right skills, and creating meaningful career opportunities that attract high-caliber talent by demonstrating how digitization and customer-centricity go hand-in-hand
  • Challenging the operating model by adopting an agile, fail-fast approach to innovation, considering partnerships with technology firms or acquisitions of start-ups that can help organizations move toward a more inventive culture.
  • Future-proofing their digital architecture by instilling an IT infrastructure that can withstand increasingly complex investment portfolios and regulatory requirements while saving money.
  • Acting as a trusted partner for the digital age by developing a broad set of policies that entrench the right protection for customer data across every process and level of the organization.

“Digital transformation is driving a seismic shift in the investment industry,” said Lou Maiuri, head of State Street’s global markets and global exchange businesses. “We’re focused on how deep-rooted digital innovation can generate new value for our clients. The three I’s of data enable financial leaders to develop highly personalized, data-driven products that appeal to a broader range of investors.”

“New digital technologies will enable firms to provide a more fluid, dynamic and interactive investment experience for clients,” added Antoine Shagoury, State Street’s chief information officer. “Moreover, they will help the industry to deliver the type of personalization investors are demanding, at scale.

"Firms that neglect emerging technologies, from Blockchain to artificial intelligence, will fail to remain competitive in this new era of finance,” he warned. 

Boston-based State Street is one of the world's leading providers of financial services to institutional investors. The company, which provides a broad suite of investment servicing, investment management and investment research & trading products to clients worldwide, had more than $29 trillion in assets under custody and administration and $2 trillion in assets under management as of December 31, 2016.

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