FSIs to boost IT modernisation spend while facing GenAI challenges

New research indicates that financial services institutions plan to increase their IT modernisation spending by 33% in 2024, as revealed by Couchbase's seventh annual CIO Survey.

Despite this rise in investment, there remains significant concern among almost half of the IT leaders in these organisations about their capacity to manage the data demands of generative artificial intelligence (GenAI).

The data underscores that 98% of financial services institutions (FSIs) have GenAI plans for the upcoming year. However, 44% admit they do not have a suitable data strategy to support these plans. A considerable amount of money is set to be allocated to these initiatives, with an average spend of USD $41.7 million earmarked for IT modernisation, and USD $16.6 million targeted specifically towards AI technologies.

Matt McDonough, Senior Vice President of product and partners at Couchbase, commented on the findings: "The financial sector is on the brink of an AI-driven transformation. Service providers are keen to introduce new benefits to customers, such as conversational banking features to improve interactions, or increased fraud protection that safeguards assets. AI has the potential to unlock these new capabilities, but many organisations aren't yet prepared to move these initiatives forward."

According to the survey, legacy technology is a persistent obstacle. Outdated systems are contributing to an annual waste of USD $4.7 million and causing delays in strategic projects by an average of 20 weeks. This situation is creating significant inefficiencies and hindering the sector's ability to modernise effectively.

Pressure on IT departments within FSIs to increase productivity is also notable. The study indicates that 71% of IT departments are facing demands to do more with less, with the average organisation needing to boost productivity by 32% just to stay competitive. This productivity challenge is driving the necessity for a robust data strategy to support GenAI applications.

Infrastructure concerns are also prevalent. A majority of respondents, 59%, are anxious about whether their organisations possess the necessary compute power to support GenAI. Additionally, 64% of the respondents mention that their corporate social responsibility and environmental goals necessitate a move towards more efficient infrastructure before GenAI can be fully adopted.

The survey findings suggest that financial services organisations are increasingly aware of the potential benefits AI tools can bring. Over three-quarters (76%) are ramping up their investment in AI tools to enhance developer efficiency and accelerate the creation of new GenAI applications. Meanwhile, 61% believe edge computing will play a crucial role in supporting new AI applications by reducing latency and bringing data processing closer to where it is needed.

Nevertheless, there are apprehensions about the swift adoption of AI technologies. About 68% of respondents believe many financial services firms have hastily adopted GenAI without fully understanding the requirements for its effective and safe usage. This rush has led almost half (46%) of the enterprises to divert spending from other critical areas, notably IT support, maintenance, and security, to meet AI objectives.

Adaptability is identified as a key attribute for future applications, with 53% of FSIs under pressure to consistently deliver improved user experiences. The average consumer-facing application is considered outdated within 19 months, while employee-facing applications lag in about 20 months. This demonstrates a pressing need for the ability to swiftly adapt and enhance application offerings continuously.

To harness GenAI's full potential, financial services organisations must invest strategically in data management and infrastructure. McDonough emphasised the importance of a versatile, centralised database solution, noting that it can "streamline operations and reduce costs while still meeting the diverse data needs of modern financial services."