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Alongside this, FS businesses across all sectors operate in an environment in which regulation continues to be more demanding and institutions are facing competition from digitally native challengers and newcomers that are often more agile.
To compete, FS businesses need to continually innovate and optimize both their enterprise-wide operating model and the products they offer their clients. “It’s wholly understandable that 2023 has been the year where EY clients have really focused on what their future-state operating models should look like,” says Ethan Schiffman, EY Americas Financial Services Tax and Finance Operate Banking & Capital Markets Leader. “How do they want to be best positioned for today and tomorrow?”
Many FS businesses have been stung in the past by transformations that haven’t delivered as promised. Indeed, according to EY research, banks are struggling to transform, with 38% of leaders saying transformations underperform against key performance indicators. In parallel, two-thirds (67%) experienced at least one underperforming transformation in the past five years.
Part of the challenge is that different functions within FS businesses are transforming at different rates. This includes tax and finance functions, which have been on a continual transformation journey in recent years, as revealed in the 2023 EY Tax and Finance Operations (TFO) Survey.
According to the survey, 97% of FS organizations are transforming their tax and finance operating models – up from 82% in 2018, when the survey was first conducted. The key drivers for change were identified by those taking part: talent, technology, the pace of legislative change, and cost.
Schiffman says FS businesses are at different stages of transformation. “On the one hand, we have clients who have taken the initiative and are on a transformation journey, and are starting to gain the benefits from transformation, such as the ability to be more agile and to transform their data and turn it into a strategic asset,” he says. “But there is a larger group who are at a far earlier stage in their transformation journey, who will really bear the brunt of relentless change unless they pick up the pace.”
It is also important to note how FS is an exceptionally broad industry, and the drivers highlighted above impact different sectors to varying degrees. This article looks at the broader FS landscape and will focus on three key sectors within:
- Banking
- Insurance
- Wealth and asset management