25 Sep 2018

Unlocking the potential of technology to revolutionise capital markets

Advances in new technology have the potential to dramatically transform how capital markets operate, driving cost and efficiency savings, and significantly improving the client experience.

Whether it is machine learning and artificial intelligence, allowing firms to increase their ability to analyse and manage risks, or Cloud computing enabling easy access to IT infrastructure and powerful tools such as data analytics - new technologies are having an impact on all capital markets participants.

These are just some of the areas which market leaders in both technology and financial services gathered in Paris to discuss last week, at our inaugural Global Innovation Institute conference.

While the many opportunities offered by technological innovation are evident to see, for firms it can be a challenge to decide where to prioritise when considering their long-term strategy, especially when in many areas the underlying technology is still maturing. 

However, the risk for firms of not engaging is potentially even greater. As many of our conference panellists discussed, if organisations wait for new technological developments to become mainstream before making the leap, they may miss out on the opportunity to shape the market and adapt their position successfully. Investment and commitment are needed to be able to keep up with the pace of change.  This issue was also recognised in AFME’s recent paper published with PwC, ‘Technology and Innovation in Europe’s Capital Markets’, where only 28% of member respondents to our survey felt that the current investment allocated to strategic technology change was sufficient.

The current climate of relative regulatory stability provides an opportune moment to address this challenge. Over the last 10 years a major priority for industry and regulators alike has been developing and embedding the post-crisis regulatory framework. While these efforts were essential for securing global financial stability, the volume of regulatory change made it difficult to focus on other strategic priorities. With most of the post-crisis framework now in place, the industry has an opportunity to focus on longer-term structural issues.

Regulators have a key role to play in supporting the successful adoption of new technology in capital markets.  As Samir Assaf, Chief Executive Officer, Global Banking and Markets at HSBC commented in his keynote address, the last crisis demonstrated the importance of regulators and industry working hand in hand to improve financial markets.

This is a message which was echoed by regulators and supervisors from across Europe at our conference - such as ESMA, the Banque de France, the FCA, the AMF and the Bundesbank. All spoke positively about the future role of technology in capital markets. While all recognised the potential risks posed by new technology, they were also unanimous in their commitment to support innovation. Indeed, technology also offers profound opportunities for regulators to enhance their capabilities, by implementing so called RegTech solutions.

The final and equally important piece of the puzzle is effective collaboration across the whole financial ecosystem.  As Rich Radley, Google Cloud’s Customer Engineering Lead, argued, the firms that really thrive will be those who have the confidence to learn from, and work with, others - whether that be regulators, small start-ups or large technology providers. Working together will be the key to success for the whole sector.