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Capital Markets: How Collaboration With FinTech Can Transform Investment Banking

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Thursday, January 25, 2018   08.52AM / EY in conjunction with Innovate Finance Nov 2017 

Innovation and The FinTech Landscape
 

Driven by a powerful blend of innovative startups and major technology players, the global FinTech industry is growing apace, using technology innovation to capture market share from incumbents in many areas of financial services. While the FinTech entrants’ greatest impacts to date have been at the retail end of the market, the opportunity for collaboration in capital markets is real and growing; this is great timing given the challenges faced mean that innovation has become mandatory. 

In this global report that we have produced in conjunction with Innovate Finance, we shine a light on the investment banking industry, examining why and how capital markets firms across the globe can and should collaborate with FinTech organizations to drive their own evolution in the years to come, and to secure their future role and position in the fast-evolving financial services ecosystem. 

The analysis and recommendations expressed in this report were produced by EY, and informed and shaped by more than 40 stakeholder interviews conducted with investment banks and FinTech firms across the globe. We would like to express our sincere thanks to all the individuals and organizations, who contributed their valuable time and insights to help make the production of this report possible. 

We hope this report will be used by capital markets players and FinTech companies to help drive innovation and collaboration to shape a brighter future. We also hope it will provide a useful source of insight and analysis to other stakeholders across the FinTech ecosystem, including policy-makers and regulators. 

Building the investment bank of the future
Imagine you were given the opportunity — and the luxury — of building the investment bank of the future from scratch. 

Wherever and however you start, it’s unlikely that you would begin from the operating model of the established capital markets players. And it’s even more certain that you’d end up with something very different from today’s investment banks. 

Instead, you would improve agility and reduce cost by assembling the organization from various components that now exist in the marketplace: using collaboration to bring together and integrate a best-of-breed trading platform with a largely externalized Blockchain-enabled back office, procured smartly on an “as-a-service” basis. 

To service clients, you’d put your smart brains in the front office, supported by all the AI and analytics they’d need, again sourced flexibly from specialist third parties. Where your new infrastructure is best in class, you might consider white labeling it to others. 

Certain corporate clients, for example, major B2B platforms may also present an opportunity for investment banks to embed products and services such as cash and liquidity management. 

Clearly, today’s investment banks can’t adapt to this model overnight. But they need to be able to compete with businesses that can. That’s one reason why — as we pointed out at the start of this paper: game-changing innovation in investment banking is no longer optional, but imperative. 

However, this new world of capital markets doesn’t only offer competitive threats, but also new opportunities. These opportunities need to be approached and addressed in the right way, methodically researched and smartly activated — all with a recognition that this type of change is very different from any that investment banks have undertaken in the past. 

As part of our research, we identified a number of organizations that support innovation in capital markets. The directory is available in our full report, which includes 130 diverse and active participants in the FinTech ecosystem, spanning not just startups, but more established players that are pushing the innovation agenda. 

And what type of entity will this change produce? Essentially, an organization with a much thinner spine than investment banks have today, making extensive use of industry utilities and a diverse range of partners from across and beyond the FinTech ecosystem. 

The investment bank of the future is taking shape today. For capital markets firms, now is the time to evolve, or risk facing a struggle to catch up in the years to come. 

Download Executive Summary Here

Download Full Report Here

Proshare Nigeria Pvt. Ltd.

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