Most industries have long coped with outside technological disruption — think about how the music and film industries have had to respond to new mediums for distribution and consumption, not to mention piracy. Now, it's investment banking's turn. Technology is transforming the industry in a way never experienced before.
Historically, technology has been used to create new trading platforms, develop new financial products and streamline processes for cost savings. Today, evolving digital technologies challenge the traditional investment bank value chain, allowing for new entrants to be both innovative and disruptive. This comes at a time when it is cheaper and easier than ever for smaller, innovative startup firms to create new technologies and the available discretionary spend in investment banks is under siege, regulatory requirements are on the rise, and clients are more demanding.
But this shouldn't be viewed as a negative. Rather, it is an opportunity. Digital technologies using smart data management solutions help to satisfy regulatory requirements and are also changing the client experience in the process. For example, the implementation of Swap Execution Facilities has allowed greater regulatory oversight whilst improving efficiency, clearing costs and speed of pricing for users. This is a win-win.
Digital technologies also provide new opportunities for value creation in understanding client needs, enabling upselling and new product formation. These novel growth prospects support greater client engagement and, as digital moves client interests beyond execution to analytics, there is a greater incentive to realize strategies for trade lifecycle optimisation.
To meet this demand, a shift in mindset is required. The Chief Digital Officer (CDO) must support this rethink. Banks should consider engaging with fintech startups for fresh ideas. In addition, internal siloed platforms need to be replaced with integrated platforms,
A look across other industries — retail, for example — shows that a complete transformation has occurred, yet in investment banking digital is still seen as a growth initiative. What the C-Suite of banks need to understand is that digital engagement will be necessary for survival.
Sign up for CIO Asia eNewsletters.