The social, economic, and public health impacts of the global pandemic accelerated the digital transformation process across the industries. Considering the investment banking industry here, the COVID-19 brought several disruptions like liquidity stress, fall in equity stress, challenges to meet the evolving regulations, the democratization of the market, the sudden shift to the remote work environment, and rapid technological developments.
Still, investment banking became an agile participant and addressed most of the current challenges. The industry-focused more on risk models and customer experience and initiated technology developments at a faster rate. These are some of the changes we can witness in the industry. Take a look.
Artificial Intelligence (AI)
Businesses today are using deep learning and machine learning to ease daily problems. In the investment banking industry, AI technology helps in transforming front, middle, and back-office operations. It helps to deliver value through innovative products and services, provide personalized portfolio companies’ and investors’ experience, and reshape operating models with special features.
- Goldman Sachs uses one AI software that runs on natural language processing. It determines and advises the best and suitable investment for clients by analyzing analysts and news reports.
- TC Capital uses AutoML for trading comparison tables. AI here has compiled data from 43,000 companies and 560 assembled variables.
Quantum computing has three states – 1, 0, or both using quantum bits. This helps to solve complex data operations. Experimental quantum systems are used to test and develop financial services use cases such as optimization of asset trading, targeting and prediction, and risk profiling.
Though it is still an ongoing research process, JP Morgan Chase and Barclays have invested heavily in research in partnership with IBM.
Robotic Process Automation
One of Deloitte’s surveys suggests that 88% of financial service professionals want technologies as they see it as a strategic priority. In the years to come, we may find RPA to achieve better results in marketing promotions and point-of-sale solutions.
One solid example we can quote hers is that UBS Group AG uses robots on its trading floor. The robots here help to motive and improve trader’s performance.
The middle and back-office operations at investment banking find issues such as costly reconciliation processes and systems, the bulky trade confirmation process, issues in data quality leading to lead break, and complex regulatory reporting requirements.
With a blockchain-based database system [data from the world’s 8 investment banks], there were 70% cost savings on financial reporting, 50 % on centralized operations, 30 percent on compliance, and 50% on business operations.
Blockchain is in the latest line of technology, and its full implementation needs an understanding of the technology for the entire business model and evolving market. But, the future days of blockchain in investment banking are more promising.
Digital audio is growing again at a faster rate. The podcast market is thriving in the industry as more Americans listen to online videos. A lot of content is being developed in the M&A activity, license groups, and other deals. This digital assistant is expected to be used more as an advertising platform and guide investors regarding safe and profitable investment plans.
To sum it up:
Investment banks today are recognizing the benefits of technology in their domain. At the same time, there occurs a skill gap that inhibits or slows down their process of transformation. Also, technology adoption is becoming a core competency in the market to thrive well in the industry.
This has compelled them to search for talents who can transform the industry through their competent skills. To generate more value to the customers, it is necessary to hire candidates with technical skills [upgrade through various courses], interpersonal skills [it comes out of experience], have updated knowledge about the industry [an investment banking certification may help in this regard] and who are resilient.
If you are interested in investment banking, then catch up with the trend to flourish in the industry.