Capital Markets Digital Transformation: Connecting the Dots
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Capital Markets Digital Transformation: Connecting the Dots
The objective of this newsletter is to curate the key insights from a selection of articles allowing to: * Understand changes in the expectations of Capital Markets participants * Explore how Digital Transformation can transform the business models to answer those needs. * Focus on Digital Transformation in securities value chain.
Curated by Josiane Tamer
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Overview

The objective of this newsletter is to share key insights from a selection of articles allowing to:

  • Understand changes in the expectations of Capital Markets participants
  • Explain how a Digital Strategy can be an enabler
  • Provide examples of digital initiatives
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TransferWise gains access to UK payments infrastructure

TransferWise gains access to UK payments infrastructure | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
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Josiane Tamer's insight:

Reinventing financial services

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Capital Markets 2020: Will it change for good?

Capital Markets 2020: Will it change for good? | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

Capital Markets 2020 -pwc

 

Cost reduction opportunities and pressure to stay aheda of market trends will force capital markets players to stretch towards new partnerships in order to look for efficiencies from third party services. 

 

Technology and Regulation impact On Investment Banks

Regulatory reforms and technological advances in particular are challenging traditional capital markets (CM) participant models.

On one side, regulatory reforms are:

  • Creating a balloon effect, risk when squeezed or reduced in one sector of the capital markets ecosystem, will emerge in another. Risk taking and capital facilitation will increasingly move into the shadow banking system (such as crowd funders and peer-to-peer lenders) challenging thus investment banks business model.
  • Rising the cost of capital is pushing banks to cut costs and to review their business model.

 

Banks might expect the following scenario:

  • As margins tighten, revenues will fall. Since operating costs are tied to volumes, not revenues, and since the revenue decline is driven mostly by price erosion, the full effect of lost revenue hits the bottom line nearly dollar-for-dollar.
  • Capital requirements are also tied to volumes, not revenues, meaning they will not decline.

 

This means that banks can only keep ROE constant by significantly lowering their CIR, well below current levels.

  • For a top-10 dealer, we estimate that 6 to 12 percent of revenues will be at risk in the next 5 years. (based on Mc Kinsey analysis)

 

Simplification, standardization, and digitization will likely be the only sizable avenues left for:

  • keeping customers through a better customer experience
  • substantial cost savings through operational excellence

 

Use Technology as a tool to create competitive advantages as well as to facilitate operational and regulatory changes.

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Blockchain in Capital Markets

Blockchain in Capital Markets | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

Blockchain in Capital Markets- by Oliver Wyman

This arcticle describes what is offred by blockchain technology, abstract existing constraints and imagine a target ecosystem based on this technology, lists hurdles to adoption and suggests baby steps.

 

What is offered by blockchain technology?

Blockchain (or distributed ledgers) offers a new approach to data management and sharing that is being proposed
as a solution to many of the inefficiencies afflicting the industry. The prize on offer is a new architecture, where all
capital market participants work from common datasets, in near real-time, and where supporting operations are
either streamlined or made redundant.

 

We see three routes to the adoption of the blockchain:
• Challenger disruptions developed outside of the core capital markets ecosystem. We expect to see these in the
next 18 to 24 months.
• Collaborative efforts to shift the existing value chain to blockchains. While such efforts are already starting, with
potentially massive benefits, it is likely to take more than ten years to overhaul core parts of the system.
• Mandated policy where supervisors direct the industry to introduce new market infrastructure, so that costs are
reduced or that operational or systemic risk is lessened.

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A blockchain-based
capital markets system: What does utopia look like?

A blockchain-based<br/>capital markets system: What does utopia look like? | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
  • If we started from a blank sheet of paper today, with access to efficient, well-architected blockchain
    technologies, we would expect the market structure and processes to look very different. First Figure above provides how it will look like
  • Potential Benefits for capital markets are available in the second figure.

 

Blockchain in Capital Markets by Oliver Wyman

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A Shift to Modular Financial Services

Josiane Tamer's insight:

Understanding the shift in demand and in supply chain to identify latent business needs.

 

Modular demand means that product providers no longer own the
direct customer relationship, with clients easily picking and choosing from multiple providers, perhaps with the help of a mobile application, aggregator or online platform.


Modular supply occurs when the supply chain is not delivered in-house, when parts of production are performed by different firms.

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Reinventing the Value Chain

Under construction

Business Needs:

Investment banks Cost Reduction and processes rationalization

 

 

Technologies such as blockchain simplifies securities processing value chain which shorten the transaction life cycle (in terms of validation, confirmation, matching, settlement etc). 

 

This simplification of the value chain eases the delivery of a FO to BO  integrated position view. 

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The Truth About Customer Experience

The Truth About Customer Experience | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
Touchpoints matter, but it’s the full journey that really counts.
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All you need to know about blockchain, explained simply

All you need to know about blockchain, explained simply | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
Many people know it as the technology behind Bitcoin, but blockchain’s potential uses extend far beyond digital currencies.
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Azure/azure-blockchain-projects

Azure/azure-blockchain-projects | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
azure-blockchain-projects - Home of blockchain and distributed ledger projects like Azure Blockchain as a Service DevTest labs artifacts.
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10 Most Successful Big Data Technologies

10 Most Successful Big Data Technologies | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
As the big data analytics market rapidly expands to include mainstream customers, which technologies are most in demand and promise the most growth potential? The answers can be found in TechRadar: Big Data, Q1 2016, a new Forrester Research report evaluating the maturity and trajectory of 22 technologies across the entire data life cycle. The…
Bruno Braure's curator insight, May 29, 2016 4:42 PM

10 Most Successful Big Data Technologies

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Reduce cost to income ratio via Lean, Modular and Integrated IT platforms

Reduce cost to income ratio via Lean, Modular and Integrated IT platforms | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

Pwc Recommendations for Capital Markets IT Platforms: Lean and Integrated IT Platforms

Josiane Tamer's insight:

PwC estimates that holistic simplification and integration programs can improve a firm’s cost-to-income ratio by an average of 30% over a three- to five-year period.

 

They recommend that firms implement features that result in lightweight, modular platforms.

Josiane Tamer's curator insight, July 26, 2016 11:20 AM

PwC estimates that holistic simplification and integration programs can improve a firm’s cost-to-income ratio by an average of 30% over a three- to five-year period.

 

They recommend that firms implement features that result in lightweight, modular platforms.

 

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How financial services industry can unlock the value in big data?

How financial services industry can unlock the value in big data? | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

Ideas for value creation thanks to Big data

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Disrupting beliefs: A new approach to business-model innovation | McKinsey & Company

Disrupting beliefs: A new approach to business-model innovation | McKinsey & Company | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
In a disruptive age, established business models are under attack. Discover how incumbent companies can reframe them.
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Building the Digital Platform - Insights From the
2016 Gartner CIO
Agenda Report

Building the Digital Platform - Insights From the<br/>2016 Gartner CIO<br/>Agenda Report | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

CIO Agenda Insights 2016

 

An Evolution from a System view to a Platform view.

 

A platform view of a business emphasizes the value of connections.

 

What’s different now is that new digital opportunities
and evolving threats, including new commercial and ethical challenges, reveal that .

 

Companies should exploit the "Platform effect" throughout their businesses and specifically in:

  • Managing Delivery
  • Managing Talent
  • Executing effective leadership

 

Managing Delivery: 

  • Building out bimodal platforms for delivery of better digital performance (Refer to the bimodel figure)
  • Bimodal have captured the global business moodwith leading companies increasingly separating the more exploratory parts of their businesses from those that exploit the well-established business. 

 

Managing Talent:

  • Digital has evolved from an innovative trend to core competency.
  • The biggest talent gaps are around information — big data, analytics, and information management — followed by business knowledge/acumen. Worryingly, many of these gaps are the same ones CIOs cited four years ago.

 

Executing effective leadership:

  • Adapting CIO leadership style to exploit a platform effect and build a network of digital leadership inside and outside the entreprise.
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Reduce cost to income ratio via Lean, Modular and Integrated IT platforms

Reduce cost to income ratio via Lean, Modular and Integrated IT platforms | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it

Pwc Recommendations for Capital Markets IT Platforms: Lean and Integrated IT Platforms

Josiane Tamer's insight:

PwC estimates that holistic simplification and integration programs can improve a firm’s cost-to-income ratio by an average of 30% over a three- to five-year period.

 

They recommend that firms implement features that result in lightweight, modular platforms.

 

Josiane Tamer's curator insight, August 10, 2016 5:27 AM

PwC estimates that holistic simplification and integration programs can improve a firm’s cost-to-income ratio by an average of 30% over a three- to five-year period.

 

They recommend that firms implement features that result in lightweight, modular platforms.

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Capital Markets IT platforms

Josiane Tamer's insight:

Integration of different value chains and silos driven by business needs (regulatory and risk management) and by cost reduction needs 

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How BNP Paribas Securities Services stays ahead of the game

How BNP Paribas Securities Services stays ahead of the game | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
Philippe Denis, the chief digital officer of BNP Paribas Securities Services, built his first computer in 1978 at the age of 18, and it is this commitment to embracing new technology that is driving his work at the French company, from his innovative use of big data to hosting brainstorming sessions on blockchain technology.
Josiane Tamer's insight:

Optimization and Simplification of Processes via blockchain.

Changes in the value chain.  

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Global Electronic Trading: Blockchain: After the POC

Global Electronic Trading: Blockchain: After the POC | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
Josiane Tamer's insight:
Let's start with Baby Steps to reach blockchain adoption
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Microsoft's 'try before you buy' blockchain cloud with Ethereum lining

Microsoft is offering Blockchain as a service on the Azure cloud in conjunction with Ethereum developers ConsenSys.
Josiane Tamer's insight:

#Business models brought by digital technologies

#Openness and collaboration to increase business value

#Distributed applications

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The economic essentials of digital strategy | McKinsey & Company

The economic essentials of digital strategy | McKinsey & Company | Capital Markets Digital Transformation: Connecting the Dots | Scoop.it
A supply-and-demand guide to digital disruption.
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