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For capital markets firms, the push to digitally transform has dominated much of the past decade. From simple automation that provides back-office efficiencies to disruptive technologies that have revolutionized the business, modernization initiatives have touched every aspect of the industry.
Read on — and watch — for insights from our experts regarding what’s next in the modernization of capital markets.
4 Trends That Will Shape the Future
Modernizing Capital Markets
CONCLUSION
The Next Generation of BPO
Trend #4
Rapid Innovation
Trend #3
Embracing Emerging Tech
Trend #2
A Service-Based Approach
Trend #1
introduction
Now, as we look ahead, the question is:
The answer isn’t simply to make sure you’re using the hottest tech of the moment. Instead, the next generation of capital markets leaders are determining the best ways to use AI, the Cloud, blockchain and digital to solve the industry’s most pressing business problems and uncover ways to evolve their operating models. We’ve tapped Broadridge’s leading technology and business minds to explore what it means for banks and broker-dealers to modernize today and move forward. Digital transformation is not a one-and-done event. On the contrary, it’s an incremental and continuous march toward improving how capital markets firms work, while creating new avenues of value along the way.
How can we continue to modernize?
A service-based approach increases technology access and capabilities for everyone.
Today
What's next
industry impact
But the resources available to do so — both in terms of budget and expertise — vary dramatically. Tier 1 banks have invested billions into emerging technologies and employ thousands of technologists. With fewer resources, Tier 2 and 3 banks have largely played catch-up.
Banks certainly recognize the importance of modernizing their operations.
<<< introduction
Watch now
trend #2 >>>
"Component-based architecture allows institutions to consume or get into their modernization journey much more easily and incrementally. You don’t have to concern yourself with the technology or the maintenance. You just need the component and the service that solves your problem."
— Justin Llewellyn-Jones
Head of Capital Markets, North America (Equities, FX & ETDs), Broadridge
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Learn more about how successful capital markets firms are mapping their transformation.
Instead of consuming technology in monolithic products and large IT projects, banks will be able to identify their pain points, as well as targeted solutions to solve them. Firms can leverage innovative industry solutions and platforms created by Fintech providers, reducing costs and risks in the process. With this approach, which is referred to as mutualization, Fintech solutions can be used for critical but non-differentiating functions (such as back-office processing), as well as next-gen technology integrations. This offers an efficient way to access scarce talent and transform operating models.
In this next phase of modernization, more organizations will move toward a service-based architecture, enabling them to select the services they need to fill in gaps and remain competitive.
Fit-for-purpose solutions will allow firms to quickly and easily integrate, test and deploy new technology. In addition, technology teams at capital markets firms won’t need to worry about software maintenance or upgrades; instead, they can focus their time on value-added, differentiated activities.
Say goodbye to giant transformation projects and say hello to modernization that makes sense for your organization, no matter your size.
VP, Next Gen Product Management, Broadridge
— Edda Son
“A service-based architecture will allow banks to focus and invest in their immediate needs and move toward the modernization of their technology in a smaller but focused approach.”
Emerging tech will create new opportunities for revenue and value.
For example, the finance team may want more visibility into cash management, or the operations team may want to accelerate reconciliations, and they turn to technology for a solution.
Traditionally, capital markets firms have identified a problem and then built or bought technology to solve it.
“AI’s very interesting, because if you apply AI on data, you can certainly uncover really unique insights which can help your trading strategy. But it’s the combination of AI with a novel consumption model which we think really creates a lot of value.”
— Vijay Mayadas
President of Capital Markets, Broadridge
Explore The ABCDs of Innovation® and turn technology disruption into opportunity.
The question is shifting from, "How can technology solve this problem?" to, "What does technology make possible?" By asking the latter, organizations will leverage technology to drive and potentially transform their business strategy.
For many functions, this approach makes sense. Increasingly, though, emerging technologies such as AI, blockchain, the Cloud, and digital are not only providing solutions, but introducing wholly new possibilities for applications and revenue.
Some near-term examples of new opportunities for technology include the application of AI to corporate bond data to recommend natural buyers and sellers, and the potential for robotic process automation (RPA) to enhance back-office operations. The latter can be enhanced with intelligent automation, which can resolve issues and exceptions using machine learning.
In this case, the sky is truly the limit—the industry is only bounded by its imagination.
<<< trend #1
trend #3 >>>
Learn more about using blockchain technology in the repo market.
Discover the role AI plays in helping dealers and institutional investors better connect and trade corporate bonds.
Rapid innovation is becoming part of the capital markets culture.
They may work on a solution for months, with little feedback or engagement from internal and external stakeholders. The process takes too long and causes firms to spend more than necessary. And by the time the solution reaches the market, the customer and/or business needs may have evolved.
In many capital markets firms, technologists remain siloed from other business functions and take a waterfall approach to development.
<<< trend #2
trend #4 >>>
"Banks can’t sit back. The technology is evolving and changing constantly, and you’ve got to build in a learning function so that you can get in front of the innovation."
— Jason Birmingham
Chief Operating Officer, Global Technology & Operations, Broadridge
Learn how the Cloud is helping capital markets firms become more agile innovators.
In terms of product development, we’re starting to see more iterative methods based on the lean startup model. The mindset is moving toward implementing solutions faster, gathering feedback, and improving as you go. The whole value chain is involved, and there’s less risk of spending months on a project that ultimately experiences a failure to launch. The net effect is technology that truly serves the users — from the back office to the bank customer.
The industry is about to witness a transformation in how it approaches innovation — one that borrows from the playbooks of Silicon Valley startups.
Digital transformation will accelerate for all firms as a result. The mindset change will also help improve tech talent recruitment for the industry, as capital markets firms show they’re leveraging advanced technologies in innovative ways via modern development and deployment methods.
Combined with the other trends, especially the componentization of technology services, the outcome will be faster, more effective innovation happening more often.
“A lean mindset is at the heart of innovation. It’s really understanding what your customer needs — and maybe not assuming what they need — and then, through techniques like MVPs and steel threads, showing value early and often.”
The next generation of business process outsourcing combines advanced technologies with human expertise.
However, most outsourcing has focused on repetitive and simplistic back-office tasks, such as expense approvals or reconciliations.
The ability to outsource business processes has enabled capital markets firms to increase efficiency, mutualize expenses and reduce risk.
“Business process outsourcing continues to focus on operational resilience and business continuity as top priorities — besides increasing process efficiency, helping clients mutualize the cost of operation and innovation, and enhancing the overall client experience.”
— RP Sandilya
Head of Business Development & Client Solutions, Wealth & Global BPO, Broadridge
The future of operations is digital. Learn more about the growing role of digital labor.
The same goes for functions that firms have typically kept in house, like regulatory compliance, advanced income booking, trade booking, and more. Look for capital markets firms to rethink their relationships with business process outsourcing (BPO) partners, reconsidering how they can outsource (or perhaps share) more complicated aspects of their operations. This evolution will enable firms of all sizes to access technology in multiple ways, and even leverage more advanced technology than they’d be able to deploy on their own.
We’re moving toward the ability for firms to outsource complex, higher-value tasks, such as lending securities.
The model will entail leveraging BPO providers that offer highly skilled talent with operational and technological expertise. Then digital labor tools, such as RPA, can be layered on top of the human expertise to enhance controls and reduce risk.
The next generation of BPO will most likely involve partnering with near-shore or even on-shore talent to provide some geographic diversification.
<<< trend #3
conclusion >>>
Let's talk about how you can continue modernizing your capital markets operations and ensure you're ready for the future.
The rise of disruptive technologies is bringing efficiencies to every corner of our industry. But as our experts noted, from now on, the big story isn’t just the tech. It’s the ability to deploy technology for the best use. And the companies that discover how to strategically apply innovations in the ways that make the most sense for their business will be the winners of this new era.
Digital transformation of capital markets firms is well underway.
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Broadridge, a global Fintech leader with over $4.5 billion in revenues and part of the S&P 500® Index, provides communications, technology, data and intelligence. We help drive business transformation for our clients with solutions for enriching client engagement, navigating risk, optimizing efficiency and generating revenue growth.
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"The big story isn’t just the tech. It’s the ability to deploy technology for the best use."