FinTech in 2018: Building a Case for Technology-Driven Collaboration
Technological finesse has begun to define the disruptors of the fixed-income business. Over the last 10 years, global players that invested heavily in technological investments have seen sharp increases in market share. The reason? Technology helped them manage the market and service customers far better than their peers.
The C-Suites of some of the biggest investment banks are now giving technology precedence in their overall corporate strategy. In fact, the top six US bond dealers have announced a whopping $26 billion technology budget – an investment that’s believed to have changed the game altogether. Even non-bank liquidity providers, who are a force to be reckoned with, have upped their ante and are investing heavily in technological upgrades.
One example of this is leading investment banker PIMCO recently roping in Dirk Manelski as Managing Director and Chief Technology Officer to spearhead its technology strategy. This move is likely to align business to client requirements, something that’s crucial for any successful asset manager looking for a strong investment performance.
In an environment where dealer profit margins are shrinking, and leading to low volume growth and dwindling profitability, technology can serve as the biggest enabler for gaining market and revenue share. Technological investment also has the potential to increase distribution and reduce costs at a time when winning the trust of the clients can make or break the fixed-income business.
It wasn’t so long ago that real-time pricing and automatic hedging were only the job of technology departments of the biggest behemoths. Today, third-party providers have joined the fray, leading to intense competition. In such a scenario, data-inclined technologies such as artificial intelligence (AI), machine learning and quantitative trading stands to serve as the biggest competitive edge for fixed-income market.
Collaboration for Innovation
According to report by Accenture, the first quarter of 2016 saw financial technology ventures receive $5.3 billion worth global investment, a remarkable 67 percent growth compared to the same period in the year before that. Fast forward to 2018, and consumers globally are still resting their faith in FinTech with the sector witnessing a steady inflow of tech-investment. As a result, consumers relying on mobility and digital trading are expected to experience newer levels of convenience going forward.
This changing consumer mindset is giving rise to business solutions and re-engineering processes that are cheap and fast. The focus on FinTech is actually garnering interesting reactions from banks and other service providers. While in some segments, banks are partnering with each other to compete against FinTech start-ups, in more cases than not we’re seeing collaboration and partnership leading to innovation.
Transitioning from Legacy to Digital FinTech Processes
Digital transformation is part of most fixed-income market players’ agendas as they’re looking to transform into more agile, efficient and competitive entities. Digitalization can generate significant cost savings, making the process self-funding. Currently the technology available can become the necessary disruptor. But some organizations take a longer time to transform due to the size and complexity of their legacy systems. Bigger organizations, however have an advantage in terms of the huge amount of data that they accumulate. In the digital world, large repositories of valuable customer and market information can be explored with the help of Cloud-based cognitive solutions, which facilitate speed and agility.
Technology for Regulatory Compliance
Reports about offshore accounts created to prevent billions of dollars from being taxed have brought financial regulation back into global focus. Financial service providers are under tremendous pressure to ensure compliance with regulatory guidelines that might vary across geographies, and range from anti-money laundering regulations to country-specific norms.
Engaging third-party technology warrants banks and financial service companies to possess huge customer data, without which the software can’t identify anomalies or areas that fail to comply with regulations. Any case of inaccurate data would result in reorganizing client information, which would lead to a colossal waste of time and resources. Technological growth helps financial institutions better comply with an increasingly complex regulatory atmosphere.
Extrapolating into the Future of Financial Services
Today the way a bank leverages technology quickly determines the competitive edge it has over others. The means in which advanced data is collected and analyzed has changed the dynamics of the sector and pushed banks to their limits to deliver services with total precision.
Going forward, technologies like artificial intelligence (AI), the internet of things (IoT), block chain, open banking platforms with application program interfaces (APIs) and robotic process automation (RPA) will only evolve, fostering newer levels of efficiency. CIOs standing at the helm of their organizations will have to leverage the right ones that can help drive efficiency at all levels, minimize costs, and enhance customer experience. In other words, the future will belong to the ones who consider technology as a necessity and not just a differentiator.
Make sure to download the Fixed Income Leaders Summit agenda to check out all of the great activities, speakers, and sessions planned for this year.