For asset executives, wealth managers, and the investment banks, the modern technological revolution plays a foremost role in driving business strategy. Forestalling extensive commotion in the financial segment, several capital markets firms have begun spending on the latest tools and technologies. According to Accenture and Oxford Economics survey report, approximately 93% of capital market tech executives have a long-term plan for innovation.
It designates that the capital markets business seems to have a clear vision of the competitive challenges ahead. Around 90% of tech executives in this segment are planning to integrate virtual assistants to handle customer interactions within the next five years. Besides, 87% expect their B2B financial transactions to take place on a blockchain soon.
Stumbling Blocks in the Capital Market
As said above, the capital markets industry is already preparing for a more digital future. Some have also invested hugely in the latest technologies like cloud computing and artificial intelligence (AI) to augment their business efficiency further. However, like every other financial business area, the capital markets firm faces specific challenges that can block the way of getting the most out of the technology investments. It includes – incompatible systems, change management, compliance issues, or lack of collaboration with IT.
Besides, capital markets professionals struggle with digital innovation more than other industry segments. For instance, 37% agree that lack of system integration or compatibility as their primary obstacle in achieving foreseen results from technology compared to only 23% of retail bank companies. Fortunately, executive leaders at capital markets can resolve this issue to a certain extent.
They have to pull all their employees together behind a given technology strategy. Getting everyone on the same page could be tedious as most of the investment firms are organizationally fragmented today. But, one can achieve it with fewer adversities if senior leadership has a fixed vision for digital innovation and emphasizes employees’ communication and training when implementing the technology strategy.
Innovation is No Longer Optional
With the massive capital fees, high structural costs, and stagnant profits, the investment bank’s returns on equity (ROE) have sustained to dissatisfy the executives. Although several challenges on its way, the capital markets firm is continuing to work hard to address them. Some steps are now taken to transmute culture as well as reconstruct hope in these areas. Given these challenges, the capital markets firms are leading the resources on the right path.
They are now focusing on bringing variations instructed by regulators or compelled by outward pressures. According to experts, this, too, shall bring in some problems, such as the amalgamation of unrelenting pressure and the complexity of meeting regulatory deadlines is resulting in organizational fatigue. It is also leaving management short of bandwidth to look ahead to invest in other latest initiatives to enhance revenue.
It shows that the capital market’s business model has to evolve quickly. Besides, the historic evidence denotes that the market has been partially effective in delivering modulations and handling the cost base, and thereby creating the need to evolve in a whole new way. In short, innovation is no longer optional in the capital markets now.
Digital Transformation in the Capital Markets
Today, the capital markets firm finds itself in a transitional period open to digital trends and the new business models. Globalization, regulatory changes, and the improved convergence of traditional and latest business models are the significant drivers for the acceptance of this digital transformation. Besides, the outsourcing comes with a critical opportunity for capital markets industries to balance their demand for integrating new competencies by digital tools while reducing other costs.
If you did not know, among the stakeholders in this segment, there would be a higher investment appetite for digital securities. And, this will be followed by technology transformation, AI, and blockchain. Notably, the breakneck speed at which the Blockchain industry is evolving has made it challenging to keep up with the change. For some investors, however, knowing the right source to trust in this respect is complicated than ever. Therefore, there is a need for skill-how that helps them direct towards the right path with less or no hassle.
This is where a new management model comes to play. Albeit, the traditional qualities of a leader like decision-making, accountability, risk-taking, delegation, and empowerment still holds good, the new age skilled professional will be able to handle various other tasks. For instance, they can adopt the agile way of thinking across program execution, and ensure if the business and IT are working together in collaborative engagement.
Besides, they can quickly drive design-thinking and human-centric service design to create a new product-service experience. With the help of a use-case based approach, the digital age professionals can remove fear and guesswork from the organization. They can also move from budgeting and project-based model to product or platform approach and then prioritize the tasks based on business outcomes.
Several capital market firms have successfully reaped the desired result from the digital approach. For example, the US-based asset manager utilized a cloud solution to deliver personalized marketing for customers of financial institutions. This uplifted the website registration by 80% and reduced the campaign publishing time by 50%.
Similarly, a sizeable middle-east bank developed a mobile-only bank service with a reimagined platform for various tasks, including investments, banking, and insurance. Their new-age procedure comprised a human-centric design focusing primarily on the bank’s core ideas, business model, and digital experience.
Capital Market in Days Ahead
The capital market companies seem to be further along the technology maturity curve compared to other firms in the financial sector. The business leaders realized the significance of digitalization and are willing to apply it in their everyday operations to enhance efficacy, reduce costs, and thereby help the customers. Now is the time to evolve for capital market firms, or they may risk facing a struggle to catch up in the future.