78% of institutional investors agree that technology has made financial markets ‘better and more efficient.’ This figure is staggering when compared to the 20% of participants who feel that technology has ‘made financial markets overly complicated.’ But where does the cloud fit in?
Greenwich Associates data also reveals that antiquated processes cost financial institutions (FIs) over $1.5 billion annually. Those already leveraging the cloud have realised cost savings, but others are more reluctant to migrate off-premises due to privacy and security concerns.
Finextra spoke to Craig Butterworth, global head of global account management at Symphony, about their recent report in collaboration with Greenwich Associates ‘From Chat to Collaboration: Trust, Automation and Intelligence’ and why collaboration is an essential part of the data journey in capital markets.
Transformation among incumbents
Butterworth highlights that despite trust and security being a concern just five years ago, there has been a rapid acceleration in cloud adoption recently. Many FIs are publicly outspoken about building their own cloud infrastructure and in turn, collaborating with the likes of Amazon Web Services (AWS).
"Traditional institutions have this incredibly tricky challenge where they’re under huge pressure to evolve and be innovative in the products which they offer and how they service their clients, but at the same time they’re severely impeded by cumbersome legacy systems. It’s not as simple as just ripping and replacing these systems, as any new applications must communicate with them.
“Leveraging the cloud means they can build upon pre-existing applications, accelerating the innovation cycle and delivering real-world value for bank customers at pace. FIs want the agility and speed of the cloud with the security of on-premises data.”
The Greenwich Associate paper summarises this point: “Moving away from systems interacting through paperclips and duct tape is a no brainer but doing it in such a way that the cost of change doesn’t cancel out the short-term benefits of the upgrade is critical. This is a big reason why middle and back-office systems often run on outdated technology whereas the front-office gets the latest and greatest.
“The ideal path forward is via platforms that put the power back in the hands of the user who, whether tech-savvy or not, is left with the ability to create automation tools tailored specifically to their needs.”
Enabling ML in financial services
Butterworth continues to say that “ultimately, the cloud enables technology like artificial intelligence in its broadest sense to become a reality. Cloud supports the huge data storage capacity, scalable compute power and embedded graphic processing units (GPUs) to handle the huge data stores and algorithms that AI systems need to work on an ongoing basis.
“Furthermore, cloud offers built-in agility, making it the most viable place for many of the complex AI-driven business processes that drive rapid innovation.” The shift to user friendly innovation has resulted in FIs being forced to deliver products and services that are as fast, cheap and efficient as those used in their personal lives and at the same time, as easily customisable and increasingly accessible. This is where machine learning and more specifically, natural language processing (NLP), are having a real impact.
However, voice NLP is not as mainstream within FIs as it is in daily life. Butterworth explains that this can be put down to “legacy telephony infrastructure and very low-quality audio which means that the accuracy rate is quite poor. Tackling legacy infrastructure issues is not a quick fix, especially in capital markets compared to retail banking.”
When considering collaboration, this presents an opportunity for chatbots. “Collaboration is fundamentally about sharing information. The critical digital aspect is that the latest technology enables a much more comprehensive set of information to be brought together in context.”
“With NLP, the need for individuals to consciously collaborate can be removed. By applying AI to connected datasets, bots can be facilitating that connectedness effortlessly in the background in a much more targeted way and with a lot less noise than if humans are doing it,” he says.
The capital markets firms who seize this opportunity and execute on it in the most cohesive way will be those who secure a competitive advantage for many years to come. “Laying the right foundation in terms of data architecture, cloud strategy and of course, a secure collaboration platform built for the needs of the industry are utterly integral for success,” Butterworth concludes.