Firms could improve agility, innovation and competitiveness with five tech design principles.
Industry backdrop: Compressive disruption
Because the capital markets industry is somewhat shielded by large balance sheet requirements, regulation and network effects, firms are unlikely to experience the kind of big-bang disruption caused by companies like Uber and Netflix in other industries. Nonetheless, three key trends are creating a perfect storm of “compressive disruption” that’s forcing change and reinvention in capital markets:
- Stagnating revenue: Following the global financial crisis, top-tier investment banks and boutique advisory houses have seen their pool of revenue stagnate or fall in real terms.
- Growing competition: While the industry’s revenues are stagnating, capital markets players are still dealing with the rise of non-bank competitors in both primary and secondary businesses.
- Weak returns: Capital requirements for balance sheet-led businesses have increased so much that they have destroyed shareholder value generation at even the purest of investment banks.
Five technology design principles
Between now and 2022, the capital markets industry will be shaped by automation, self-service expectations, and the continued rise of non-bank liquidity and execution providers. In this context, technology offers a way for firms to get ahead. Industry leaders will adopt an approach to technology that is based on five design principles:
Change is neither cheap nor easy, but firms could begin to align their organizations with the five technology design principles mentioned above. Here are four key ideas for getting started that could unlock the capacity required to invest in new business—based on Accenture's experience and project analysis:
As we journey toward 2022, technology will be a way for firms operating in the capital markets industry to get ahead and differentiate.