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Top 10 Challenges for Investment Banks in 2016: Digital disruption

Beat Monnerat, Accenture’s Senior Managing Director of Financial Services for Asia-Pacific | Jan. 6, 2016
For the eighth consecutive year Accenture outlines ten of the key challenges facing investment banks. On day eight Accenture says that banks should embrace digital innovation.

Read: Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7  | Part 9 | Part 10

Investment banking was once characterised by high barriers to entry. Technology has changed that -- from software solutions to cloud computing and everything as a service offerings, startups have leveraged tech and chipped away at various business lines.  Regulators in Asia have often have made it simpler for new entrants to compete and the cost of launching a startup has even dropped, making it more plausible for even more competition.

Other players -- such as asset managers and hedge funds-that have their own platforms and the desire to expand into investment banking also face reduced costs. The lowering of these barriers is helping to fuel a resurgence in innovation, with client emphasis driving new thinking and the biggest ideas originating from unexpected places.

Cost and complexity -- once sources of competitive advantage -- now serve as encumbrances, making traditional players seem antiquated and arbitrarily complex. Scale and global reach have become de facto commodities, and information and liquidity are no longer constrained.

Accenture research indicates that banks are devoting three times as much money to maintaining legacy systems as they are to building new platforms needed for growth. Meanwhile, venture capitalists are pouring money into innovative fintech startups.

Investment banks can therefore no longer afford to operate from behind fortress walls. Their future success will depend upon external collaborations that support new products and better customer service.

Specific steps for investment banks

  • Redefine clients, value propositions and roles in the ecosystem.
    Investment banks need a clear, up-to-date picture of the clients theywant to serve and the services they want to deliver to those clients. Bank should collaborate with partners to achieve scale and pace and try to relegate non-core functions to other participants when appropriate.
  • Embrace modern architectural principles and concepts.
    The design of all future products, services and platforms must be experience-driven, service-oriented, collaborative and cloud-based.
  • Establish a renewed focus on talent. Investment banks should aim to recruit candidates who are focused on design and accustomed to working at pace, and seek to create an environment where such individuals will thrive and grow
  • Encourage and institutionalise innovation. An external perspective can help investment banks initiate cultural change.That may involve adding individuals with a track record of digital success to the board of directors, establishing an internal growth council, setting up a "seed fund" and an incubator to cultivate promising digital opportunities, becoming involved in exteralfintech labs like those run by Accenture and forming closer ties with the venture capital community.

 

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