Digital “laggards” in the investment industry stand to lose $79m (£59m) for every billion dollars (£754m) of revenue, according to a new report.
The research by Roubini ThoughtLab said that investment providers which go fully digital will see major gains while firms in the later stages of embracing digital technology will see increases of 8.6 per cent in revenue.
But those who fail to embrace digital technology risk “falling out of the race altogether”.
This is being driven by changing investor expectations, which is happening faster than many firms can react.
Lou Celi, chief executive of Roubini ThoughtLab and director of the research, said: “Investors no longer compare investment providers just against their financial peers, but against Amazon and Google.
“They want the same level of customer-centricity, transparency, and ease of use that they have come to expect from the retail and technology sectors.”
The research found investment firms are receiving rising demands for product simplicity and transparency, anytime access on any device, robust cybersecurity and innovative products.
Based on its sample of 1,503 investment firms, the research calculated an indicative return on investment based on the performance impact that various types of investment firms expect from digital technology over the next five years.
To estimate this it analysed the incremental costs of reaching the next stage, along with the revenue and cost impacts expected over a five-year period.
The net-present value of the benefits for a full-service financial institution going from beginning to transitioning over the next five years is equal to 31.9 per cent of revenue, or an average of 6.4 per cent a year.
Meanwhile the net-present value for a full-service financial institution going from transitioning to advanced is 21.8 per cent, or an average of 4.4 per cent a year.
The model also calculates a “laggard penalty” based on the difference between the financial results of advanced firms and beginners.
It calculated this penalty was $79.2m (£59.5m) for each $1bn (£745m) of revenue, with big players like full-service institutions, institutional investors, and asset management firms pay the largest penalty for moving too slowly.
The report warned that digital laggards may pay an even bigger price of losing the business of future investors because younger generations want to be with a firm they view as a technological leader.
The report was based on a survey of 1,503 investment providers from 15 countries, advisory panels and in-depth interviews with more than 100 industry leaders and experts.
damian.fantato@ft.com
