Technological disruption has become the norm for many industries. 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. To make business more challenging, the available discretionary spend in investment banks has been squeezed by regulatory requirements and more demanding clients.
But despite that gloomy overview, it is imperative to see the opportunities.
Digital technologies using smart data management solutions can help to satisfy regulatory requirements and also change 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. This is where analytics comes into play.
To analyze data effectively banks need the right tools. Demand is now moving beyond platforms designed for industrialised data collection to true data discovery platforms designed to find the "unknown unknowns".
Smart data solutions can provide quick insight opportunities based on prior experience and market conditions, while advanced data visualisation tools are able to draw on multiple data sources and provide new levels of granularity in a single interface.
The next step is for executives to ensure that the data-driven conclusions gleaned from multiple data sets are made available to all areas of the bank. Market leaders are making the most of the opportunity to create richer interactions with their clients by providing data and analytics for their trading activity, and portfolio "health checks" in the wealth management space.
While most executives understand analytics can be used to better inform sales, it can also be used to detect misconduct in the front and back office, for “know your client (KYC)” and anti-money laundering (AML) decisions, as well as to enable better decisions around collateral allocation and cost of collateral.
Analytics is key to smart decision making. Being able to draw factual, data-driven conclusions in order to support analysis of business sentiment or showcase operating trends is becoming a prerequisite for the leaders in the industry.
If banks put technology to good use, they can create greater client engagement. To effectively embrace technology, a shift in mindset is required. 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 digital transformation has occurred, yet in investment banking digital is still seen as an IT issue. What banks need to understand is that digital engagement will be necessary for survival.
Beat Monnerat is Accenture's senior managing director of financial services for Asia-Pacific.
