According to JLL’s new 2023 Banking and Finance Outlook, the current landscape is guiding financial services organizations to accelerate their digitalization efforts to combat challenges. These companies are anticipated to spend an additional $31 billion worldwide by 2025 on artificial intelligence (AI), meaning the banking and financial services industry will deliver the largest AI investments in 2023.
“Banks are actively enhancing their digital strategy by adopting new automated solutions to improve efficiency and provide better experiences for both clients and employees,” said Giles Wrench, vice-chairman, Financial Services, JLL. “AI and machine learning are transforming the banking industry and enabling organizations to remain competitive and relevant.
Despite rising operating expenses, there has been enormous growth in the adoption of technology, data platforms and AI systems to optimize costs, define new growth models and enhance the customer and employee experience. Many organizations have already incorporated AI tech into their daily business operations and are employing tools like AI-powered virtual assistants for customers.
Technology helps banking and financial services organizations stay ahead of regulatory changes, evolving customer needs and growing competition since accelerating digital innovation improves operational efficiency and unlocks new sources of value. As such, a strong real estate strategy that provides the necessary infrastructure to support advanced technologies is vital.
Attracting top talent with workplaces that foster innovation
To keep up with the rapid pace of AI advancements, financial institutions are prioritizing hiring objectives to gain expertise in cloud computing, AI, machine learning and programming. Software developers are now one of the most in-demand roles in the industry, and since 2018, the largest banks have increased hiring for software developers and data scientists by 90%. In addition to software development, cybersecurity and risk management are in high demand as banks face increasing regulatory pressures from the U.S. Federal Reserve and FDIC to improve risk infrastructure and internal governance.
The technology transformation has already been a main driver of footprint expansions for banks looking to differentiate their talent pool. TD Bank and BNP Paribas both expanded into Miami; Bank of Montreal, Comerica Bank, Goldman Sachs and PNC all expanded into Dallas; and Capital One expanded their presence in Atlanta and Philadelphia.
Another way financial services firms attract talent is by offering leading amenities, such as LEED buildings, connections to mass transit, neurodiversity support, finishes that create calming environments, energy efficiency, open and collaborative areas, quiet spaces and cafes with healthy snacks. Firms are also adapting to new hybrid work models to help manage operating costs and maximize space efficiency.
Outlook for the banking and financial services sector
Even in the face of uncertainty around future space needs, financial services organizations signed longer leases in the first quarter of 2023 than pre-pandemic, reflecting their commitment to the role of the office in supporting long-term corporate goals. The average lease term length reached 8.4 years in Q1, exceeding the reported length in 2019 of 8.2 years. Finance recently surpassed technology in office leasing activity.
The full report focuses on how banks can build on progress to date to maximize efficiency and stay the course for long-enduring business growth, and innovation and talent and location strategy are ways to help achieve that goal. The report also covers navigating cost pressures and increasing regulatory requirements; accelerating the net-zero agenda; and aligning real estate strategy to long-term growth objectives are other ways for banks and financial services companies to combat current challenges and thrive.
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