13/02/19 | Rainer Schenk

Building the capital markets technology of the future

Highly recommended to read

Capital markets are in a period of accelerated development, driven by the twin propellers of regulation and digital technology. In response, many financial companies are moving away from the models of the past and towards a future defined by innovation, automation and customer-centricity…

… If properly implemented, replatforming can achieve four key benefits:

Cost cutting. Technology can help banks offset the impacts of rising costs and, in some cases, declining revenues. Some banks have already achieved significant economies from rationalizing and decommissioning. Still, cost cutting is a double-edged sword. While it may improve short-term performance, it can also suffocate innovation.

Standardizing. To create efficiencies banks should aim to standardize business processes across asset classes, as many have already done in trade settlement. At the same time, there is scope for standardization of formats, languages and reference data—which can be aligned with standards such as FIX, FPML, or in the future, ISDA CDM. Utility models offer another route to standardization, seen in reconciliation processes and conventions such as the ISDA SIMM (standard initial margin model) for non-cleared derivatives.

Digitizing. Digital transformation can help cut the cost of serving customers by enabling sales forces or creating direct pathways to end clients. It can increase volumes, reach and throughput; helping scale the business in the face of shrinking margins. It can also improve the customer experience, for example by offering self-service solutions to clients and simplifying market access.

Agility. To respond to a shifting landscape, banks should look to agile ways of working. This will enable them to become nimble and adopt new approaches faster. Agile can also shorten project timelines and boost quality and predictability. Above all it can help businesses adapt quickly when priorities change.

“Given the large volumes of data handled by capital markets players, we expect to see more and more firms embracing the value of artificial intelligence and machine learning across their organizations in transforming and automating their front through back office functions.”
John Kain
Head of Business Development, Capital Markets, Amazon Web Services