How Can FinTech Transform Investment Banking

The traditional investment banking industry has had a hard time adapting legacy technology – but as the digital revolution continues to sweep across finance, the time for transformation has come.

FinTech will transform investment banking in many ways, including using innovation to massively boost efficiency and leverage advanced technologies such as The Cloud and AI. To remain competitive, investment institutions will need to adapt and embrace these technological changes.

There are both long-term strengths and short-term gains to be obtained through FinTech and its related services. In this article, we will cover how FinTech can transform investment banking – and how financial institutions can best utilize these services.

The Union of Innovation and Efficiency

When it comes to investment banking, one of the biggest opponents to efficiency is compliance.

The need to keep up with regulatory change, which can sometimes inhibit innovation as financial teams struggle to maintain updated systems according to new compliance requirements. As a result, an investment banking team can experience organizational fatigue and drops in productivity.

Thankfully, FinTech solutions such as platform implementations and cloud migrations are reshaping how institutions think about compliance.

Embracing Cloud Computing is Essential

Using the cloud as a central database and network system enables financial institutions to achieve a more agile and connected ecosystem. Cloud computing relies on an entirely digital infrastructure, meaning that it is accessible by authorized personnel from anywhere at any time.

For the investment banking industry, the benefits of cloud computing include:

• Lower Operational Costs: Switching to the cloud eliminates the need for equipment and onsite technology that can be costly to both install and maintain. Additionally, the cloud boosts an institution’s resilience and helps to ensure that data is backed up and secure at all times.
• Reduced Capital Expenditures: Investing in technology can take a huge toll on a capital expenditure budget. With the cloud, these expenditures can be significantly reduced thanks to cloud migrations helping make infrastructure more cost-effective. Plus, many FinTech companies offer managed services to aid in providing affordable maintenance and management of these more flexible technologies.
• Heightened Connectivity: The cloud helps to synchronize departments and business teams by making data sharing easier. In turn, an institution can scale with efficiency and flexibility as decision-making happens at a faster rate.

Partnerships with Tech Companies

Though there are many major benefits to adopting the latest innovations and technologies, without the right FinTech partner institutions can quickly become overwhelmed by digital transformation.

When an institution decides to partner with a tech company, 3 key services form the cornerstones of the partnership’s success:

1. Managed Services: Managed services take the weight of system maintenance and management off the backs of busy investment banking teams. This allows for more time spent focused on customer and investor needs.
2. Platform Implementations: Finding the right digital and cloud-based platform is only the first step of the transformative process. A FinTech partner helps institutions to properly implement said platform, while also integrating applications, APIs, and legacy systems.
3. Resource & Staff Augmentation: In many cases, onboarding an entirely new department or spending vast amounts of budget on digital resources is unnecessary. This is because FinTech providers offer augmentation services that give institutions both the tech and talent needed on-demand.

Automation, Artificial Intelligence, and DevOps

To both keep up with regulatory changes and maintain a high level of investor satisfaction, investment banks must seriously consider adding advanced technologies and strategies such as artificial intelligence and DevOps to their rosters.

Automation & AI

Robotic process automation (RPA) has been making its rounds in the financial industry for some time –and with the help of FinTech, it is finally making its way towards investment banking. Automation can be employed from front to back offices. Use cases include optimizing compliance and risk models to update automatically and creating more seamless front-end user experiences.

AI also offers investment banks a huge advantage by way of providing access to much more advanced analytics. These analytical capabilities include:

• Precise predictions about trading patterns that enable institutions to proactively assess and address fluctuations in the market.
• Insights into investor behavior that make it easier to meet these investors’ expectations, while simultaneously shifting business models towards a more customer-centric approach.
• Highly accurate data visualization that simplifies the process of communicating opportunities and growth potential to investors.

Managing Customer Data

From both a regulatory and customer satisfaction standpoint, how you deal with your data matters. Considering carefully how AI, cloud and DevOps can help you manage data will help limit the risk of malicious attacks on your data. 

With the right FinTech provider, an investment bank can rethink how it deals with essential requirements, including Know Your Customer (KYC) rules and Anti-Money Laundering (AML) laws.

Blockchain’s distributed ledger technology and NFT’s stand to provide investment banks with many major advantages when it comes to back-office processes. They can be used to hold and transfer a wide range of encrypted data points while limiting risk reduction.

FinTech is revolutionizing the way we think about finance – and investment banking is no exception.