A report by Pinsent Masons has revealed that financial firms are investing more in improving their customer experience rather than their back-office functions, leaving a huge opportunity for enhancing productivity.
Although it's important to make sure customers have a positive experience with businesses, only 1% of financial organisations said they've invested in the everyday management functions, meaning the number of IT failures have increased by 138% year-on-year.
If businesses focus too much on externally-facing tech rather internal systems and processes, they leave themselves open to failure, Pinsent Masons explained.
"Financial services companies can be seriously undermined by underinvestment in the back office," Alexis Roberts, head of financial services and partner at Pinsent Masons.
"The race to capture market share through customer friendly technology is, understandably, very important but that shouldn't be at the expense of essential architecture."
One way businesses can ensure they stay ahead of the curve in by investing in new technology through mergers and acquisitions (M&A).
Pinsent Masons' report revealed that 70% of financial firms consider acquiring new technology as the most important objective of an M&A strategy, while only 46% think increasing market share is the most important objective.
"Effectively harnessing the power of technology is key for M&A activity and organic growth amongst financial services companies," said Roberts. "This is true across the entire financial services sector - not just fintech and insurtech."
He added that technology will continue to generate traditional M&A objectives including market share and launching in new territories. But businesses that aren't so willing to use new technologies are unlikely to be able to keep up with those that are more forward-thinking.
"Although M&A remains a popular method for growth, we are increasingly seeing financial services companies enter into alliances and joint ventures which give them exposure to new technologies without the same commitment as M&A," concluded Roberts.
