Coming at a time of economic challenges, post-crisis regulations, and elevated client expectations, trends in new technology and innovation provide an opportunity to address such hurdles. However, they also raise a threat of disruption.

New technology will drive change across bank functions, the workforce, and industry partnerships. Success will require developing the necessary skills to prioritize investments, collaborate where possible, and build a culture of innovation while continuing to mitigate any potential risks for resilience and cybersecurity.

The Global Financial Markets Association (GFMA) – SIFMA’s global affiliate – and PwC this week published the report, “Technology and Innovation in Global Capital Markets.” The report examines the key trends which are expected to impact the industry over the next five years, providing a vision for the future and identifying the implications for the industry and for future policy making.

Among these trends, four main findings stand out.

Technology is one of the most powerful levers banks have to address potential disruption, tackle existing industry challenges and deliver future opportunities:

While an average of 90% of survey respondents (regional breakdown: US 90%, Asia 83%, Europe 95%) identified the opportunity for cost reduction as the most important driver for the adoption of new technologies, only 27% of respondents (US 27%, Asia 30%, Europe 25%) felt the current investment allocated to this strategic change by banks was satisfactory.

There are four core technologies – Data & Analytics, Cloud Computing, Artificial Intelligence (AI) and Distributed Ledger Technology (DLT) – which have the potential to transform banks and the industry:

A clear data management strategy is an immediate priority, as it is supports the four core technologies identified. However, across the industry there are varying levels of maturity in how the data is currently managed and the approaches to utilize its future value.

Significant implementation of DLT remains a longer-term priority, based on the current complexity of bringing large-scale enterprise and industry solutions to market, as well as integration with legacy systems and considerations for data privacy and cybersecurity.

New technologies and a focus on innovation will shape investment banks to be increasingly automated, data-led, open and agile and will require their business models to be relationship-based, connecting them into a wider pool of technology and service providers:

An average of 82% of respondents (US 75%, Asia 90%, Europe 80%) believed the impact of new technologies on the workforce will lead to business and IT skills merging and future roles becoming more relationship focused. Competition for future skills will be high, requiring banks to both invest in re-skilling the existing workforce and to drive cultural change to attract new talent.

To keep pace with technology and innovation and balance potential new risks and cybersecurity concerns, banks must maintain a long-term focus and make strategic decisions to benefit fully from the opportunities new technologies offer:

Principles to assist with this strategic decision-making include, embedding data as an enabler; adopting a collaborative approach; identifying industry priorities; using agile work practices; developing a relationship-based workforce; and enabling secure and resilient operations.

Banks, policymakers and regulators must keep pace with new technologies to balance the potential risks and cybersecurity concerns they can introduce. Any future regulatory frameworks should be applied with a proportionate and principles-based approach, yet at the same time ensure a level-playing field that creates an open, competitive and sustainable market for technology and innovation.

To read the full report, click here: https://bit.ly/2HI3wwu

For more insights and the latest developments in this area, join us at SIFMA’s Operations Conference from May 6-9 in Boca Raton. 

Kenneth E. Bentsen, Jr. is president and CEO of SIFMA, the voice of the nation’s securities industry. He is also CEO of the Global Financial Markets Association (GFMA), of which SIFMA is the U.S. regional member.