Capital Markets: The Digital Transformation

Capital Markets has remained under siege since the global financial crisis of 2008. Facing unprecedented headwinds from the combined forces of regulation, market volatility, disruptive technology and an ever demanding client base, the industry’s future survival demands radical change in business practices and procedures.

Capital Markets still have a vital role to play in the creation of economic activity and wealth through lending, savings and investments. However, financial services activity now occurs less within the constraints of the physical world, and more and more via digital means. This will require a shift for the industry to be less product centric and more customer centric to generate efficiencies to improve customer experience and generate revenue. To achieve this shift firms will need to move technology to centre-stage, as an integral part of any successful firm’s strategic vision.

Much of Financial Services from M&A to asset management has remained largely immune to the technological overhaul other industries have been forced to address. However, with the overwhelming need to consume more data faster and act immediately on the information, firms can no longer avoid aggressively addressing defunct business models. Blindly adding layer over layer of legacy technology will leave firms drowning in a sea of complexity – ultimately raising regulatory risk and costs. Unable to stop the flood of data, firms have to get smarter at organizing, sharing and evaluating data, workflows and processes across the financial services value chain. Future financial regulation will impact every decision from the initial investment to final settlement. As a result, the ever increasing volume of data to assimilate, analyse and react to, will finally break down traditional methods of client interaction.

Only those firms that implement technically agile data strategies across organisations will be able to derive valuable intelligence from their data on demand which will differentiate their businesses. Incorporating structured and unstructured data across multiple trading platforms and architectures establishes trends which can provide real-time understanding of businesses.

To achieve this firms will need to harness innovation. Fintech needs to shift from a perceived disruptor to an enabler of existing business practices. Existing incumbents may need to change processes but they also provide the necessary scale and distribution models to implement change into infrastructure, as well as essential industry expertise. Fintech while innovative, risks solving imaginary problems while the real headaches go unnoticed, preventing wholesale adoption and mass behavioural change. One example would be the introduction of AI into algorithms; certain evolutionary stages need to be processed to reach the necessary digital transformation that added Artificial Intelligence can provide.

Single points of contact must morph into central agile hubs with multiple access points. Correct access to and correct verification of data will be required at every stage in the trade life-cycle to fully integrate silo’ed systems to deliver accurate data-driven decision making. As such, Capital Markets Digital Transformation is not a static one-off project but a continuous evolution which will ultimately revolutionise every financial services firm’s strategy.

Disruptive new business models, products and services now need to be incorporated into incumbent organisations and market norms to understand, address and monitor the new risks and challenges. Only by taking technology from a support role to an integral part of a firms’ future strategy will the industry be able to transform business models capable of success in the digital age.