Trends,
Trust and Technology: Financial Services and Insurance Report
Introduction
The future of financial services and insurance industries (FSIs) is a frequent topic of debate in the media and in the market, but how often do such predictions come from those working in these industries – people actually experiencing the realities of the day-to-day
We spoke to a number of senior professionals to understand what that looks like and gain authentic insight into how the efforts and lessons of 2024 will be shaped into the plans of 2025. It seems likely that the industry is set to be majorly influenced by several emerging trends that will significantly affect operating rhythms in 2025 and beyond, but which are going to top of mind for those developing 2025 plans right now.
From AI-driven automation and digital transformation to regulatory compliance and operational efficiency, firms interviewed admitted there truly is a need to
AI and automation
Redefining efficiency and revenue generation
The integration of AI has become a cornerstone of strategic initiatives within FS and insurance firms. One senior leader described AI as a “hot topic, with a large cohort of tech spend dedicated specifically to AI,” particularly in investment management.
AI is seen not only as a tool for operational efficiency but also as a way to generate new revenue streams by enhancing client-facing services. As one participant remarked, “40% of our budget is going into AI... we want to be front-running and trend-setting.”
The adoption of AI is not limited to back-office functions. Another participant discussed a roadmap to leverage AI within customerfacing roles, which would transition their team from being an internal analytics support group to a client-facing service provider. “In three to five years, we want to engage other sectors to offer our AI-powered analytics platform to clients. Even if we hit just 1% of our clients, we would create significant revenue streams.”
This shift underlines the growing need to build AI capabilities not just for internal processes, but to extend their value externally. Investments in AI will require the implementation of scalable platforms that integrate AI models into decision-making processes while also ensuring robust data governance.
It’s clear that AI is no longer an option, but a necessity to remain competitive and futureproof businesses.
40%
“...of our budget is going into AI... we want to be front-running and trend-setting”
A Senior Director of Software Engineering in an insurance firm highlighted AI’s essential role in content management, specifically in content migration and integration with new technologies. This reflects the broader trend of embedding AI across operational functions, aiming to improve efficiency and drive workflow modernisation.
85% of discussions focused on AI seen as a growth and efficiency driver With 15% leaning into aggressive use of Generative AI, with emphasis on productivity and operational efficiency enhancements
Regulatory pressures and compliance Managing change and complexity
As AI and other digital solutions scale up, regulatory compliance remains a key challenge. Companies must ensure their technology stack works with an evolving array of regulations, particularly concerning AI governance and data protection.
One compliance officer from the insurance sector commented on this complexity: “AI and regulatory updates, especially data protection laws, are critical hurdles for the next 12 to 24 months. If we implement AI in customer-facing products, we need to ensure compliance and audit these tools regularly.”
There is a growing tension between the need for rapid innovation and regulatory obligations. For example, one participant pointed out how, despite AI’s productivity potential, compliance frameworks like the EU AI Act and local regulations can be barriers to swift deployment: “We are constantly running mini audits and gap analyses against frameworks to ensure compliance with the FCA and AI regulations.”
For a business, this means any forwardlooking AI strategy must include provisions for auditability, transparency, and a comprehensive understanding of applicable legal frameworks.
Firms are also struggling with product governance, especially as compliance expectations increase. “We are finding it increasingly difficult to strike a balance between making our products user-friendly while maintaining compliance,” said one interviewee. Ensuring that AI tools are deployed in a way that aligns with fair treatment of customers will be critical for navigating this landscape.
Ensuring that AI tools are deployed in a way that aligns with fair treatment of customers will be critical for navigating this landscape
A Principal Software Architect in a financial services company emphasised the critical need to understand regulations, including data protection laws, when implementing cloud-based solutions. This observation reiterates the challenges with regulatory compliance that come with AI and cloud integration, stressing the importance to align technology decisions with strict compliance frameworks.
60% of respondents saw compliance challenges as hurdles and raised concerns about regulatory frameworks, particularly around data protection and cloud adoption
While 40% highlighted opportunities to innovate and automate processes to streamline adherence
Cost pressures and operational efficiency
Finding balance between the two
Cost reduction and operational efficiency remain top priorities across both FS and insurance. “Our cost-to-earnings ratio is currently at 70%, and without a reduction in costs, we may need to reduce headcount,” explained one FS participant.
This highlights the intense pressure businesses face to maintain profitability while managing rising operational costs. Many are turning to automation and AI as key solutions to improve efficiency, though the task is not straightforward.
The general consensus is a need to balance these cost-saving measures with long-term growth strategies, ensuring the firm does not compromise on innovation.
Automation, especially in handling redundant or repetitive tasks, was emphasised as a key area: “Automation is a big thing... managing the fallout of redundancies is part of the challenge. It’s not just about replacing people with automation; it’s about handling the impact on the workforce and maintaining morale.”
In the insurance sector, this challenge is mirrored. One leader stressed the difficulty in balancing cost reduction with customer satisfaction: “Rising claims, particularly due to the cost of advanced medical treatments, are squeezing margins. But at the same time, we must offer value to our customers without driving up premiums.”
This dual imperative of cutting costs while maintaining or enhancing customer service will likely push to strategies that deploy technology solutions that streamline operations without undermining the customer experience.
Push strategies that deploy technology solutions that streamline operations without undermining the customer experience
A Senior Director of Applications, Cloud & Integration Architecture in a financial services business noted a focus on KPIs for application modernisation. This effort reflects the need for technology to enhance operational efficiency and modernisation, and it highlights the importance of clear, measurable outcomes in modernisation initiatives.
55% of participants are viewing these pressures as constraints
While 45% framed modernisation and cost optimisation as opportunities
Digital transformation
Delivering customercentric innovations
Transformation is at the forefront of strategic planning for many FSI companies. The need to enhance customer experience, which can be done through digital channels and self-service options, has emerged as a common theme.
One insurance executive noted, “Operational excellence and customer excellence are our two key focuses. We need to give customers more options for self-service and respond to them quicker.”
The research highlights the growing importance of integrating customer-facing technologies that provide seamless digital experiences. However, the challenges of dealing with legacy systems persist. One participant described how “legacy systems still restrict us in many ways... we’re trying to move away from them but replacing them comes with significant costs.”
Transitioning to cloud-based systems while maintaining operational continuity will be a key focus area for some over the next few years.
Notably, digital transformation is also being driven by a younger, tech-literate customer base. “People are always on their phones, so having apps that are specific to your brand is essential to reach new markets,” one participant remarked. The trend towards mobile-first experiences means a need to prioritise mobile optimisation and app development to meet the expectations of modern customers.
The trend towards mobile-first experiences means a need to prioritise mobile optimisation and app development to meet the expectations of modern customers
Several participants noted plans for expanded cloud adoption. For instance, a representative from a financial services business discussed their firm’s gradual transition to public cloud services despite constraints from legacy systems. This commitment to cloud adoption aligns with the report’s focus on digital transformation, particularly for scalability and cost efficiency.
22% of participants discussed plans for transitioning to or expanding cloud use, underscoring its role in scalability and efficiency
Overall 75% viewed digital transformation as essential for competitiveness and growth, while 25% cited legacy systems as barriers
Strategic roadmaps
Creating a blueprint for
the ‘future of FSI’
Looking ahead, firms are investing to ensure they remain competitive in many different ways. “We’re building a three to five-year roadmap to engage new clients with AI-powered platforms. Our goal is to make AI an integral part of decisionmaking not only internally but also for our clients,” explained one FS participant
For a business, this means developing a scalable AI infrastructure that can evolve with the business’s growth and the market’s demands with regulatory compliance built in. However, these technological advancements threaten to come with workforce implications. “The more AI advances, the more we’ll be forced to make hard decisions about workforce reductions and reskilling,” said one FS leader.
This is where strategies should consider upskilling in order to remain proactive, creating frameworks for retraining employees whose roles are being automated. Building a tech strategy that aligns with resource management will be vital for fostering a sustainable and innovative workforce.
In the insurance sector, the focus is on balancing innovation with customer transparency. “We’re working on products that cover only essentials but are upfront about what they exclude, to keep costs down while maintaining transparency,” one insurance leader shared.
As consumers continue to demand more, businesses must ensure that digital tools not only support innovation but also communicate clearly with end users, ensuring transparency and trust are built into the digital journey.
Cost Pressures and Operational Efficiency
Digital Transformation and Cloud Adoption
Regulatory Pressures and Compliance
AI and Automation
Conclusion
As financial institutions forge through this new range of tests to remain competitive, the companies who set the standard for success will be driving the seamless integration of artificial intelligence, managing complex regulatory compliance, and ensuring that operational processes are both efficient and scalable.
Businesses will need to carefully navigate the growing pressures of cost containment while also embracing the need for digital transformation. Achieving this balance is the key to a customer-first approach, which is the cornerstone of competitive advantage. The ability to build and maintain robust infrastructure, capable of supporting technologies like AI will be a key differentiator.
However, this transformation will also require a thoughtful and strategic approach to managing the human side of technological advancements. Addressing issues such as talent development, reskilling or upskilling, and the nuances of automation will be essential to remain agile and responsive to both regulatory demands and customer needs.
Kicking off 2025 and beyond, organisations that effectively leverage AI, adapt to regulatory changes, and make thoughtful investments in their technological and human resources will be well-positioned to lead. The companies that succeed will not only excel in operational efficiency but also in fostering customer loyalty and trust, ultimately defining the future of the financial services and insurance industries in the digital age.
How Version 1 can help
Navigate complexity with a partner you can trust
Source: Research conducted through a focus group comprising senior decision-makers within the industry.
There’s
considerable pressure to stay ahead of the curve in
the ever-evolving world of
financial services. Organisations like yours face a host of challenges from changing customer and regulatory expectations,cost optimisation and talent retention.
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Leaders in digital transformation
Experienced teams of experts Utilising advanced technologies