Next year will be one of rising data expenditure by financial institutions as artificial intelligence (AI)-led applications flourish, according to separate surveys. Nevertheless, most aren’t prepared for AI adoption, with organisations having neither the skillsets nor regulatory processes in place, according to another survey.
The final flurry of industry studies for 2024 suggest that financial institutions’ data teams are going into the new year in a state of flux as the financial data space goes through a period of rapid change.
Data managers plan to spend big in 2025, with a survey by Gresham showing that 94 per cent of financial institutions it surveyed plan to increase their data budgets over the next 12 months. Four-fifths said they will commit more investment to real-time data as faster settlement times and payment cycles require firms step up their reaction times.
The increase in data budgets will be “driven largely by rising data volumes and the need for improved data accessibility”, the survey report stated. “Real-time data demands are central to this anticipated growth, underlining the necessity for immediate access.”
Manual Tracking
The Gresham survey of more than 200 senior data decision makers also found, however, that few institutions are keeping a close watch on their data spend. Just a fifth of respondents said they tracked data consumption, allocation and costs in real time. Further, two-fifths track their data consumption manually and 34 per cent said that hidden cost surprises in their data management bills are among their biggest business challenges.
These findings led the authors to question whether budgets would be rising because of genuine need or because of a failure to control costs.
“While it’s encouraging that almost all financial institutions are investing more in data management, there’s a crucial concern about how these funds are being utilised,” Gresham chief technology officer Neil Vernon said. “Is this increased spend a strategic investment to drive innovation, or are firms simply losing control over their costs due to hidden expenses and inefficiencies?
“Many organisations believe they’re saving money by avoiding upfront investments in modern data management solutions,” Vernon added. “In reality, they incur greater expenses over time due to hidden costs and outdated practices. The lack of real-time cost monitoring and reliance on manual processes hinder their ability to manage expenses effectively and adapt to today’s fast-paced data environment.”
Complex Demands
Although data is a great enabler, the increased complexities involved in onboarding and using it have made data a growing cost centre for organisations. Technology has enabled institutions to do more with their information but its application to a growing set of uses cases means that ever-greater volumes of data are swelling systems. This is placing stress on data managers.
The solution, says experts, is to be found in the construction of modern data management structures, which use AI to streamline organisations’ data pipelines.
Financial leaders in companies and financial institutions alike are seizing on those opportunities. A study of companies across industries found that half are using AI-generated insights in their decision making. The study, by SAP subsidiary Taulia, also found that 92 per cent of 600 finance department leaders said they would use more such data insights in 2025.
Financial firms, however, are lacking the capabilities to make the most of AI’s potential, a separate survey by EY found.
The professional services giant reported that only 9 per cent of firms questioned were ready to comply with on-the-horizon AI regulations and 77 per cent said they had limited workforce skills in generative AI (GenAI) capabilities.
The Gresham survey found a similar lack of preparation for AI integration, with just a fraction of the 79 per cent of respondents planning to increasing spend on the technology saying they will invest in the necessary data hygiene processes.
Bright Future
The EY 2024 Financial Services AI Survey of 106 financial services executives did provide some optimistic insights. Only 5 per cent of respondents had yet to instigated an AI integration programme, and 82 per cent said they plan to increase annual investment into GenAI processes next year.
“GenAI is considered a top priority among UK financial services executives… however, there are a number of challenges when it comes to fully embedding a fast-evolving technology into operations and across workforces,” said Anna Anthony, EY UK Financial Services Managing Partner. “Whilst some firms have made huge strides in adopting AI and have seen material benefits, many are struggling to keep pace and have considerable work to do to get up to speed with regulatory standards.
“For firms to remain competitive it will be essential that they develop and roll out new training and upskilling programmes and put in place appropriate risk and regulatory control frameworks.”
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