Financial institutions are pushing the envelope on emerging technologies and McKinsey & Company, the global management consulting company, is advising they should act now to future-proof themselves against growing cyber-risks.

McKinsey partnered with the Institute of International Finance to survey financial institutions around the world regarding their current and planned usage of ten key emerging technologies.

A majority of the companies indicated they are prioritising adoption of, and investment in, four of them: cloud and edge computing, applied AI, next-gen software development, and digital identity and trust architecture.

The big four, McKinsey said, are likely to see quicker adoption than another six: advanced connectivity, future mobility, immersive reality, quantum, machine learning and Web3.

Heading the list is cloud and edge computing, with 84 per cent of those surveyed confirming it is a trend being considered.

Followed by AI, it is number one in applicability to most financial services organisations.

McKinsey said: “While these technologies can provide exponential benefits, they can also bring cyber-risks that companies must mitigate using their existing cybersecurity capabilities.

“The research shows that current capabilities are falling short of addressing these risks. Most survey respondents also recognise the need to strengthen critical cybersecurity capabilities, including third-party or supply chain management and privileged access management.

“As companies continue to increase their reliance on newer technologies, they must ensure they have thought through and implemented the necessary risk management capabilities. Otherwise, they may find the risks outweigh the benefits.

“As the technology landscape in the financial-services industry continues to evolve rapidly over the next three to five years, and as the associated risks mount, now is the time to future-proof the environment.”

McKinsey said that the increasingly crowded and fast-moving technology landscape is pressuring companies to keep up.

Financial institutions must not only grapple with how to best employ and protect their current technologies but also pay more attention to the growing field of emerging technologies that promise to strengthen their businesses — offering benefits such as increased automation, scalability and cost savings.

Financial institutions should consider if they are investing in and using the right technologies and cybersecurity capabilities. Does it include the right metrics and reporting? Does it satisfy risk appetite, provide transparency to regulators and executives, and identify strengths and weaknesses?

There are also questions of having the right talent for implementation for now and in the future.

Applied AI gets nearly as much attention as cloud and edge computing, with almost 80 per cent of respondents calling it relevant to their businesses. AI and machine learning have a long history in financial services.

McKinsey said: “Corporate and investment banks, as well as insurers, were early adopters of AI and machine learning, decades before other financial institutions. The rest of the financial-services industry has caught up in recent years, and adoption has only continued to grow.

“This aligns with broader technology trends in financial services, as applied AI technologies continue to evolve and offer the potential for increasing value to companies. The next stage of AI — generative AI — promises unprecedented disruption of the industry.”