Investment banking involves the trading of securities or the promotion of securities by an individual or the organization. It is a dynamic and fast-changing profession. Driven by high net worth individuals, surging trade and commerce, the investment banking industry is expanding at a noteworthy pace across the globe.
Some of the key players in the market include – Goldman Sachs, JP Morgan, Morgan Stanley, Deutsche Bank, Barclays, Credit Suisse, Bank of America Meryl Lynch, and, many more.
The integration of the domestic and global markets has led to a new segment of investors, called Foreign Institutional Investor (FII). Moreover, the market movement and investors’ interest keep changing. Furthermore, the innovative customer-facing portals, big-data analytics, sophisticated in-house applications, higher transparency, security, and recent regulatory changes have led to major challenges and triggers as well. Let us investigate here.
Investment Banking Industry: Technology challenges and solutions
This article covers a few of the major challenges and triggers in the investment banking industry. It might help to achieve optimum benefit, maintain credibility, and take care of the investors’ interests.
Big data analytics in the investment banking industry
The investment banking professionals face a rise in cost pressures and dwindling economic environment. In the wake of improving customer satisfaction and profitability, investment banks are adopting value-based pricing models. To improve customer service and reduce churn rates, the use of big data analytics seems to be a better option.
- Managing and analyzing humongous unstructured customer data
- Implementing a robust strategy to improve customer experience and sales
Big data analytics solutions cater to the dynamic needs of investment banking companies. It helps them to collate and interpret business and customer data from disparate sources. They can –
- Categorize and monitor customer behavior
- Calculate and predict risks
- Improve customer experience
- Develop a long-term relationship
Cybersecurity in Investment Banking
The investment bank has an enormous amount of sensitive information and any compromise would lead to monetary losses and reputation damage as well. There is a necessity to protect the company’s IP and proprietary data by developing an ecosystem of protective technologies.
- Intrusion into techno-gadgets of customers to acquire data
- Sophisticated attacks on pending M&A transactions to misuse information
- Privacy of top-level executives is a concern to secure data
- Security measures for autonomous devices
- End-to-end security for IoT data
- Protection of digital platforms
- Secure data collection and management
Talent Acquisition in Investment Banking
The investment bank industry still struggles to retain top talent or professionals with investment banking certification or newbies. Though the industry has faster promotions to attract talent, the associated long working hours and tight deadlines seem to be a negative factor to keep the talent.
- Professionals are leaving in droves
- Identification of new ways to attract and retain talent
- Young professionals are drawn toward alternative sectors, e.g., innovative start-ups
- David Solomon, CEO, Goldman Sachs says, ‘show them the money’. Dress-code relaxation might not stop them
- Building people-centric culture through employee learning and development, setting the bar for high performance, clear communication, coaching, rewarding individuals, and many more toward delivering the employee experience
- Providing opportunities for leadership development, change management, customer-centricity, and training in soft skills
Blockchain in investment banking
The blockchain-based prediction market platforms and exchanges challenge traditional investment banks. Goldman Sachs, J.P. Morgan, and Santander are getting onboard with blockchain technology.
The status quo of capital markets having a network that connects token investors and KYC providers are challenged. A few of the challenges are:
- Reconciliation processes and systems turn costly
- Cumbersome trade confirmation processes
- Trade breaks may occur due to data quality issues
- Complex regulatory reporting requirements pose challenges
- Automation of compliance
- Dividends and voting through blockchain
- Unlimited access to the market 24*7*365
- Cost-effective and faster international money transfers
Technology Solutions to overcome internal barriers
The IT implementation is different across the regions, branches, and departments. The introduction of innovative changes and technology is a big deal as the challenge lies in how it should get implemented across the business.
- Front, mid-, and back-office are siloed concerning IT systems
- Operations team need no change but the front-office team need innovation on customer-facing applications
- Use of multiple trading platforms across the asset classes poses a complex digital ecosystem
- Iterate on software to meet the needs for analytics, data, and applications. A flexible and scalable cloud environment could be a solution.
- Intelligent investment banking understands the business. Robo-advisors can guide investment banking decisions.
- Artificial intelligence and automation may yield unparalleled analysis through risk assessment, value addition, consistency, and thereby improve the quality of decisions.
Any business is defined by customer service, delivery, and customer relationship management. Therefore, it is critical to understand the targets, offerings, and the ways to achieve it.
Technology is both an opportunity and a challenge as well. It is how you use it and flourish it for your investment business.