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The accelerating speed of automation - intensified by the pandemic - is having a major impact on capital markets organisations. So together with S&P Global Market Intelligence, WBR Insights and the Capital Markets Innovation Summit (CMIS) community we set out to explore the sector's technology strategies for 2021.
WBR Insights surveyed 100 heads of innovation at capital markets firms across the globe - drawn from banks (75 per cent), hedge funds (15 per cent), and market-makers (ten per cent) - asking them a range of questions about their major challenges and future IT plans.
They told us that the biggest lesson of the past 18 months had been the need to purge their business of inefficient processes and outdated legacy systems, and to replace them with technologies flexible enough to flourish in tomorrow's environment, however it might evolve.
Improving revenue and value delivery to clients (73 per cent ) and creating greater efficiency (62 per cent ) came top of our respondents? list when asked about their priorities for improving workflow management. As I wrote in the report, 'targeting revenue-generating projects is clearly a priority?.
Matthew Aslett of S&P Global Market Intelligence - one of several industry specialists to join me in commenting on the survey's findings - argued that ?prior investments in data and analytics have helped organisations cope with the impact of the Covid-19 pandemic?, and these investments are set to continue.
A critical strategic decision for organisations is whether to invest in their own digital platform or to go with third parties. ?Partnering with third-party providers? was the leading digital transformation strategy - chosen by 38 per cent of respondents - as opposed to trying to build their own solutions internally (19 per cent ). This resonates with my own view, which is that firms ?want to focus on their core offering and leave the technology builds to outside experts like Confirmation?.
57 per cent of respondents said their organisation are presently experiencing difficulties in integrating automation technology. One reflected that ?even the transaction approval system is a bit outdated?, another that 'there are a lot of paper processes that still exist?.
This was borne out by replies to our next question; which area of your company's technology infrastructure needs most urgent improvement? For 35 per cent of respondents it was technology that ?mitigates risk in manual processes?. Regulators are pressing firms to move on from inherently inefficient manual procedures and - as I?ve observed - they want them 'to adopt technology that leads to fewer errors and better fraud control?. This is one of our key concerns at Confirmation.
When questioned about their strategic priorities for adopting AI technologies, 57 per cent of respondents said they were using AI to facilitate operational efficiency while 52 per cent used it to enhance their regulatory compliance. FINTECH Circle's Susanne Chishti believes that AI systems can ?identify noncompliant behaviour from both employee and client and alert compliance officers more quickly?.
We asked where organisations are looking to drive these new tech and business models. For 37 per cent of respondents, it's via an innovation hub. Will Robinson, conference director of CMIS 2021, was enthusiastic about this aspect of the survey, saying: ?To see innovation hubs take on such a central role in firms? innovation strategies is very exciting.? ING's Stephane Malrait observed that hubs could enable firms to benefit from ?greater links to FinTech companies?.
It's evident that legacy infrastructure can't keep pace with today's digital transformations and regulatory change, let alone increasingly dynamic market conditions and growing client expectations. However, the future looks bright for those capital markets firms that are data-led and client-centric, open to building relationships with third-party providers, and quick to adapt to the opportunities of new automation technology.
To read the full finding from the report, click here or to arrange a call to run through the highlights, feel free to contact me.
Caroline Winch, Commercial Director, Confirmation, part of Thomson Reuters