Financial Services Seizing Value with Technology

The digital opportunity for capital markets firms

January 7, 2019

RESEARCH REPORT

In brief

Anticipating widespread disruption in financial services, many capital markets firms are already investing in new tools and platforms.
Capital markets firms have already made significant investments in artificial intelligence and cloud computing, with blockchain on the horizon.
Capital markets firms face significant challenges in change management; buy-in from all levels of the organization is needed.

Many capital markets firms anticipate widespread disruption and are already making strategic technology investments to boost their competitiveness. In our survey, capital markets executives say they expect digital transformation to boost their firm’s bottom line, improve customer loyalty, reduce operating costs and create new revenue streams. They seem to have a clear picture of the industry’s future; one where virtual assistants will handle the majority of customer interaction and business-to-business financial transactions will occur on a blockchain.

"The industry is changing so quickly that if you can’t move fast, you’ll be left behind … in four or five years’ time, there will be a massive shakeout."

– STEWART CARMICHAEL, Chief Technology Officer – Schroders Investment Management Ltd.

Which areas of capital markets will see the most dramatic benefits?

All three respondent groups within the capital markets segment of the survey—asset managers, wealth managers and investment banks—say they expect technology’s influence to grow over the next three years but that specific areas will see the most dramatic benefits.

Capital markets executives predict specific parts of their business will see the most dramatic effects in three years.

80%

of investment banking executives expect technology will have a great impact on trade finance in three years, followed by foreign exchange tracking at 70%.

90%

of wealth management executives expect technology will have a great impact on private wealth management in three years, followed by both investment portfolio management and wealth preservation at 70%.

80%

of asset management executives expect technology will have a great impact on asset management in three years, followed by investment planning and management at 60%.

Big expectations for blockchain and analytics in capital markets

Today, capital markets are highly focused on customer-facing blockchain and data analytics. Three years from now, analytics is still predicted to have the most significant impact, but artificial intelligence moves up, level with blockchain.

37%

of capital markets firms are investing today in AI to improve client-facing processes.

Improved change management needed to realize maximum value

Compared to other financial services industries, capital markets appear to have embraced emerging technology the most; however, firms struggle with digital innovation, namely buy-in from the workforce. Twenty-seven percent of respondents say a lack of executive support stands in the way of technology innovation (vs. just 17 percent for retail banks). Further, 30 percent of survey respondents say lack of employee support for digital transformation is an obstacle.

While organizational structures can make it challenging to get the entire workforce on the same page, leadership from the C-suite to set a clear vision for digital innovation, emphasizing communication and training, can help. Agile development, which creates a continuous feedback loop between an organization’s business unit leaders and its technology teams, can help drive innovation and speed up the pace of change.

Technologically, capital markets are poised for the challenge digital disruption presents. Once change management is addressed, firms will be competitively positioned.

Learn more about the survey results and the actions capital markets firms can take to boost their competitiveness foster change management programs.