The US financial sector is undergoing a transformative shift towards innovation, solidifying its status as a key player in research and development (R&D) investment. Recent data compiled by R&D experts at Source Advisors illuminates a striking surge of 70.4% in R&D spending within the sector, indicative of a fervent drive for groundbreaking advancements.
Within the finance and insurance industry, companies are significantly increasing their R&D expenditure, propelling the total investment to an impressive $20.9 billion, a substantial increase from the previous year’s $12.3 billion. This surge not only establishes the sector as a frontrunner in innovation but also surpasses the national average by nearly sevenfold, according to the latest figures from the National Center for Science and Engineering Statistics (NCSES).
The notable increase in R&D investment is primarily attributed to a heightened focus on integrating new technologies, notably AI, into financial services.
Moises Romero, Senior Director of Tax Controversy at Source Advisors, emphasized the critical role of R&D investment in driving progress and maintaining competitiveness within the sector.
While embracing innovation is essential, experts in tax matters caution that companies may inadvertently miss out on potential tax savings associated with R&D initiatives. Therefore, there is a pressing need for finance and insurance firms to carefully assess their R&D expenditure and explore eligibility for R&D tax credits. Notably, the average successful claim within the sector amounts to a substantial $1.1 million.
The surge in R&D investment reflects a significant shift in the sector’s approach, with a remarkable three-fold increase observed over the past five years. Finance and insurance entities now represent a notable share of 1.74% of total R&D expenditure across the United States.
Romero stressed the importance of aligning R&D investment with strategic objectives to ensure tangible returns on innovation initiatives. This strategic alignment is crucial for companies seeking to leverage their investments effectively and drive sustainable growth in an increasingly competitive landscape.
