How FinTech can transform the Investment Banking Landscape?

By Mr. Prabhakar Tiwari, Chief Growth Officer, Angel Broking

Financial Technology or fintech has transformed the financial sector in multiple ways but there are some sections that are yet to tap the complete benefits of fintech. Initially, fintech was the prerogative of innovative start-ups or small, medium businesses. However, in recent times, large corporations are also observing the need for fintech given that it makes processes much easier and far more agile.

Investment banking is one such area: the sector needs new partnerships and business models to work efficiently with capital. It needs next-generation digital innovation. Solutions like advanced analytics can offer support in predicting trading patterns, understanding investor behavior, and sentiment, and providing more accurate data visualization.

Similarly, fintech brings game-changing technology to the table, like Blockchain and Artificial Intelligence (AI). For investment banks, embracing fintech should be part of analysing long-term potential, while prioritizing short-term gains. Additionally, investment banks need to lose their reservations about technology like cloud computing.

How To Start Incorporating fintech?

Firstly, it is important to identify where the need to innovate exists. Secondly, the investment bank has to choose the right technology partners. Lastly, stakeholders must set up a governance framework within the firm – one that supports efficient innovation.

As firms step up to embrace fintech, it is important to remember that fintech companies have a better understanding of technology than the intricacies of capital markets. Similarly, investment banks are expected to deliver short-term returns as the benefits of technology-led innovation are realized in the long term.

What Model to Adopt?

There are two ways to incorporate fintech, one is a centralized approach and the other is a decentralized model. In the centralized model, a dedicated innovation team is established which is separate from the firm’s business units. Under the decentralized method, individual business units run projects and work independently with the external fintech provider.

It is more suitable to adopt a hybrid model which allows benefits of both models. You want a structure and clear leadership, but you want flexibility as well. Only this way, the sector will be able to reap the benefits of the fintech revolution.

Way Forward

As the next generation is going to be more dependent on technology and tech-based solutions, banks have to keep up. In fact, big names are already moving towards change, integrating new-age technologies into their processes behind the scenes.

As investment banking embraces fintech, there will be an increased influence of artificial intelligence in the sector as well. In order to prevent cheating and fraud, there are several technologies which are using AI. For example, digital banking, cryptocurrency, enterprise tools, software, and the insurance industry.

Moreover, with more people using online financial accounts, there is improved access to paychecks. For instance, startups worldwide are transferring salaries to employees who do not have bank accounts through fintech apps and individual payment options.

Investment banks will have to improve agility and reduce costs. The future of investment banking is likely to witness in-class trading platforms that are supported by highly automated, and potentially largely externalized, blockchain-enabled, back offices. Alongside, the front office will be supported by AI and analytics to best serve clients.