A CEO’s Perspective – what’s driving technology investment in capital markets?

While taking a break this summer I had the chance to reflect on my first two years at Rapid Addition. When I joined in the summer of 2019, I wasn’t expecting to be navigating the company through a global pandemic within my first 9 months.

Just as we were accelerating our growth plans, everything was suddenly put on hold as we shifted to remote working. Our focus quickly turned to ensuring operational stability and the health and safety of our staff.

The same was happening with our customers, which meant that projects stalled, prospects went cold, and the momentum we had coming into 2020 all but disappeared. This certainly created a different set of challenges to the ones I thought I would be facing when I joined just a few months before. No doubt an experience I shared with many.

Thankfully the lull was temporary and, as the industry adjusted to new ways of working, things quickly picked up towards the end of last year – in fact, since Q4 of 2020 we have never been busier.

Interestingly, this is something I’ve heard from other colleagues in the industry, but why is that?

Increasing confidence to restart initiatives previously on hold due to Covid is part of the story, but I think there are other factors at play. Judging by the breadth of innovative projects we are engaged on, I see the acceleration of a trend that was already gathering pace prior to the disruption caused by the pandemic.

Below is what I believe to be behind this uptick in activity:

Regulation no longer driving the technology agenda

The industry has emerged from a world where regulation has dominated the industry’s ‘to do’ list since the global financial crisis.

IT budgets, resources, and management bandwidth, particularly at sell-side firms, have been fully consumed by regulatory compliance programmes. ‘Grow the bank’ and discretionary projects were iced. But the regulatory burden has been tapering off (in fact, the UK government’s recent Wholesale Markets Review consultation paper suggests some of the MiFID reporting requirements might even be eased).

Now that regulation is no longer driving the technology agenda, firms are refocusing on how they can leverage IT spend to drive growth. But there is a lot of catching up to do. Just think about how much technology has advanced over the last decade and you can see what I mean.

Structural change is the best path to sustainable efficiencies

Reshaping the cost base has been a priority for firms, as they looked to rebuild their balance sheets in the aftermath of the financial crisis and offset the squeeze on margin caused by increased regulatory costs.

However, the realisation has dawned that trimming legacy operational models can only achieve so much (a strategy that was likely maxed-out some time ago). So structural change is the only genuine path to sustainable efficiencies and has led to a real focus on redefining workflow and automating business processes.

Buoyed by trading profits resulting from market volatility and cheap financing over the last few years, firms are taking the opportunity to rapidly transform their operations.

New growth agenda fuelling technology investment

Across many firms we are seeing a mentality shift from ‘surviving’ to ‘winning’.

Senior executives have been preoccupied by regulatory compliance, risk management, and cost reduction over recent years. This focus has now shifted to not only how they compete more effectively, but how they genuinely differentiate themselves from their peers.

‘Getting by’ on legacy products or white-labelled solutions might have kept costs down but doesn’t do much to differentiate firms from their competitors or win new business. A desire to return to a growth agenda is fuelling technology investment.

A new era of innovation and strategic agility

Regulation and cost efficiency challenges haven’t gone away, but the emphasis has undoubtedly changed. Sell-side firms, asset managers, and trading venues are looking for trading technologies that have the flexibility to support their evolving business strategies while also being interoperable with their existing application and infrastructure ecosystem.

This enables a more iterative and agile approach, minimising disruption for counterparties and clients as new services and products are deployed.

The open and more modular philosophy of technologies such as the RA Platform help firms move away from discrete large-scale, multi-year projects to a mode of constant innovation.

Given everyone’s experience of the last 18 months, strategic agility of this kind will need to be a core competence for all firms going forward.

Finally, I think there is also a psychological angle behind all this.

Financial organisations have proven to themselves that they can change and change quickly, when needed. This type of firm-wide commitment to innovation and questioning of old practices is now becoming a force for success, in those organisations that are emerging as the winners

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About the author

Mike Powell is a senior leader and driver of business growth and transformation with extensive international experience in the field of fintech and data.

Mike has a diverse background across multiple operational roles, ranging from leading sales, marketing and service teams to change management, organisation design, business/commercial strategy and global P&L ownership.

He specialises in building value enhancing partnerships with industry participants and technology partners in areas such as cloud, big data, trading technology, analytics and regulatory solutions. He is a regular speaker at industry events and builder and leader of effective, motivated teams that deliver business success.

Contact Mike