- Lower barriers to entry for financial technology and solutions have resulted in increased innovation and potential competition. As processing power, data storage and mobile technology have become more efficient, and cloud-based software and services have become more prevalent, the cost of turning ideas into working solutions has dropped dramatically. As noted by CB Insights, the amount of funding required to launch a technology startup fell from $5 million in 2000 to just $5,000 in 2011—and is likely even lower today.
- Finance—and investment banking in particular—has become a hot new area for technological innovation and investment. Investment in FinTech has grown explosively, rising from $1 billion in the second quarter of 2010 to $3 billion in the first quarter of 2015.4 This investment is attracting top-tier technology talent to Wall Street—although not necessarily to big investment banking firms— and creating new templates for activities, including trading, wealth management and capital raising.
- The “network effect” is in play. As more types of transactions are digitized and more institutions adopt digital solutions, digital technology’s impact will grow dramatically. The benefits of industry utilities for functions like post-trade transaction processing multiply as more firms participate. Digital strategy is now business strategy. It affects client experience, product development, market infrastructure and more—and it is increasingly being driven from outside the “four walls” of investment banks.
- Digital technology is changing everything. As our exploration of this year’s challenges demonstrates, investment banks will need to harness all of their drive and creativity to adapt to and ultimately master these changes. This new environment brings new competition, new customer expectations and continuing pressures on margins, but it also offers new opportunities and new ways to conduct business more effectively and more efficiently. While regulation, compliance and capital optimization continue to be critical issues for investment banks, management teams are approaching them in new ways. Once treated as episodic issues requiring project-based responses, they are now widely considered “disciplines” that need to be embedded in business, operations and technology functions. In this year’s Top 10 Challenges series, we examine the hot topics in digital technology and other key issues that are dominating C-Suite discussions in the investment banking industry. In this year’s Top 10 Challenges series, we examine the hot topics in digital technology and other key issues that are dominating C-Suite discussions in the investment banking industry.
Top 10 Challenges for Investment Banks 2016
01 .Workforce of the Future: Dealing with Business Change and the Millennial Challenge
02. Investment Banking Technology: Jettisoning Legacy Architectures
03. Reference Data Management: Understanding the True Cost
04. Blockchain Technology: Preparing for Change
05 .Value Based Cost Reduction: Finding the Optimal Strategy for Revenue Growth
06. Global Structural Reform: Establishing a New-Era Response to Business Restructuring
07. Trading Commissions: Rising Above the “Race to Zero“
08. Digital Disruption: Embracing an Integrated Digital Ecosystem
09. Cyber Security: Confronting the Threat
10. Market Data: Taking Control of the Cost Spiral