Capital markets: Top five technology trends

Capital market firms always have been more mature in their use of data and technology than their retail and corporate banking cousins, and the results of the CGI Client Global Insights demonstrate that the pace of change within capital markets continues to accelerate. The sector is experiencing an overarching imperative to meet customer demand and reshape business models, with new technology as the key enabler.

Here’s a look at the top five technology trends underway in capital markets.

1)  Data is king

CGI’s clients view data as one of the principal assets of their business. Data quality, consistency, reporting and control are top priorities, along with pursuing predictive analytics to drive new products and services or tailor existing ones to specific customer demands. With advanced analytics, for example, data is no longer considered just an input or output, but the heart of the business—capable of generating rich insight and new revenue streams. Clients are increasingly investing in tools and technologies that deliver these outcomes, as well as appointing chief data officers. 

2)  The velocity of digital transformation is increasing

Digital awareness and action were much higher in 2017 than in 2016, and we expect this trend to continue throughout 2018. The focus is on driving automated, real-time and scalable business models through digital customer interaction at the front end and transaction platforms at the back end.  Enterprise-wide change ranks as the number one business priority as the capital market executives we interviewed seek to achieve the three goals of cost reduction, improved regulatory compliance and improved agility to increase profitability.

Decision-making also has become more technology focused, with a majority of firms embedding digital into their lines of business and jointly empowering their IT departments and lines of business to build and execute an enterprise-wide transformation roadmap. Overall, there is an urgency to digitalize to transform the organization, improve operational performance, better serve customers and drive new business opportunities. But, coordination across lines of business remains a challenge. Many of these changes need common applications and shared operations, which are difficult to deliver in a fast changing and competitive landscape. 

3)  The role of robotics is expanding

Capital market firms were one of the early adopters of aspects of the current robotics revolution. The sell side, for example, has used algorithms in trading since the late 1990s. However, this form of automation has been very niche and predominately front-office oriented. Today, capital market executives are implementing robotics across the wider value chain. Although most are in the first stage of implementation, which involves automating routine tasks through robotic process automation software, the increasing use of machine learning, intelligent automation and artificial intelligence offer exciting new opportunities. Subsequent implementation stages are still in gestation, with a small percentage of firms pursuing and investigating proof-of-concepts for these emerging techniques.

4)  Digital services are on the rise

When it comes to digital transformation, there is a special focus on digital servicing. Capital market players are increasing their efforts to build a digital workforce and implement more customer self-service options. Alternative customer channels, such as voice input and chatbot support, are under investigation. With the changing times, there’s a need to evolve operating models so that firms stay relevant to both their customers and employees. Real-time connection, highly customized front ends, voice and automated service will be part of this.

5)  There is an urgency to protect

All of these trends require more protection—both for the customer and the firm. The capital market executives interviewed realize that cybersecurity spend is an unavoidable cost of doing business. There’s an opportunity, however, for cybersecurity spend to shift from a cost burden to a competitive differentiator as executives cite the need to offer safety and trust to their customers. What hasn’t changed, however, is the burden of complying with existing regulations, along with the understanding that this burden and its associated costs will continue to increase over time.

If you’d like to learn more about the CGI Client Global Insights and/or discuss the implications of these trends for your organization, feel free to contact me.