Capital Markets
Transformation
Despite electronic trading, true end to end digitisation of the value chain has not happened, leaving considerable friction, cost and a lack of transparency. Capital Markets is therefore shifting to a digital finance ecosystem where assets and securities are fully digitised, leveraging big data, analytics, AI and automation to drive new differentiation in analytics, straight through processing and transparent data-driven compliance & reporting. Digital transformation will provide opportunities for key players to move across the value chain by expanding their offering, consolidating the market and trading direct with buy-side customers.
Digital Platforms & Assets
Transparent & secure
Digital Platforms are the core technology that will allow financial services companies to compete long-term. These leverage cloud, AI & analytics and security.
The Digital platform will supports the digitisation of processes, products, hybrid engagement, recommendations, data insights and portfolio management. Digital platforms also need to support distribution of investment products via brokers and financial advsers.
However, traditional systems rely on physical assets (securities, bonds and derivateis) which are costly and opaque leading to friction across both trade and post-trade processes.
Moving to a digital or tokenised asset would provide clear digital ownership to increase transparency, they would also reduce costs, improve security and provide better market access.
Financial markets regulations would be automated through blockchain governed by smart contracts.
Quantamental Analytics
Differentiated research
The commoditisation and the move of many products to liquidity exchange trading have squeezed margins, which means that capital markets players need to create differentiation.
Investment firms are combining fundamental research with quantitative analysis to combine the value of big data and the expertise of investment managers to identify opportuntites.
This is particular important with the growing importance of ESG investing where information may not be quantative.
Analytics and AI will need to complement the human decision making, this will require cloud storage and compute as well as data management.
Intelligent Automation
Seamless efficiency
Capital markets are complex with many steps in the value chain leading to increased costs. Many legacy processes and technologies exist.
Buy and Sell-side organisations will focus on automation to complement a shift to higher-value human work as a necessity to reduce cost-to-serve and increase resilience. This will include the intelligent automation of simple investment requests and a focus on digitial-assistance for more complex financial arrangements.
Digitisation, robotic process automation and artificial intelligence will work alongside a secure digital workplace supporting hybrid working. Firms will also need to build digital asset technology, including blockchain and DLT, into their infrastructure and digital platforms.
Data-driven Compliance
Cost-effective risk management
The financial crisis drive new regulation focused on capital adequacy and market transparency.
The cost of compliance has increased significantly leading to a focus on data driven automation.
Mitigating risk and managing compliance will continue to be critical for captial markets firms. AI has the potential to leverage an abundance of client data, identifying risks that previously remained hidden. This expanded capability is especially important due to clients’ access to digital investment tools. The resulting volume of complex transactions are more difficult for humans to assess for risk, let alone to assess with the speed required. Analytics and AI will need to complement the human decision making, this will require cloud storage and compute as well as data management.
More sophisticated tools will support complex analysis of multiple financial and risk factors.