The State of Capital Markets Tech – 5 Key Takeaways

Toby Babb hosted a Fintech Focus TV episode discussing the state of capital markets tech. He talks to our CEO Mike Powell, Steve Grob (Vision57), Mark Montgomery (big xyt), Reena Raichura (Finergise, ex-Glue42), and Jon Butler (velox).

From market connectivity, trading platform software to data and analytics, these firms represent a broad spectrum of capital markets tech. This new breed of fintechs believe an open approach is key to innovation and sustainable agility for financial organisations.

Everyone in our industry faces a common challenge – how to succeed in a highly competitive marketplace, with declining margins and demanding new regulations, while trying to run the business on aging technology that, in many cases, is no longer fit for purpose. The problem is that slow firms simply won’t survive.

These are the key takeaways from the debate:

1. Increasing efficiency, achieving new levels of agility, and extracting more value from data are three non-negotiables for firms to succeed

Efficiency means reducing the cost of what you are doing, not doing less. We’ve seen the sell-side consolidate their activities over recent years, cutting costs but also shrinking revenue. They must find a way to make businesses profitable and re-think how they leverage both technology and data.

2. Incremental is good! Change the mindset towards technology projects and innovation

Large scale, monolithic projects just don’t work. Firm’s don’t want to tie up the capital, and multi-year projects are often beyond the horizon of senior executives.

How many such projects have any of us seen that actually delivered what they promised? Even when they do, they often swamp the ability to implement other important projects, resulting in huge opportunity costs.

Using agile, modular technology to incrementally augment and evolve legacy capabilities and infrastructure is far more likely to succeed than ‘rip and replace’.

3. Create a culture of continuous innovation

By leveraging modular, open technology that can augment and transform, as well as replace creates an environment where incremental and manageable projects can deliver demonstrable value quickly.

This approach increases the pace of change at an organisation, creating a culture of continuous innovation, ultimately making firms far more agile.

4. Integrating best of breed components creates winning solutions

The growing complexity of financial markets often means that the historical approach to large projects of either building in-house or sourcing entirely from a single vendor is increasingly outdated.

Working with modern technology that is designed to be interoperable is the way forward and has the advantage of assembling best of breed components from firms who are really good at what they do.

The end solution is tailored to the requirements of the business and leverages existing infrastructure investment, without the pain, uncertainty and cost of self-build.

5. Embrace a different future

Our world has changed dramatically over the last 9 months or so, and many firms in our industry have coped well with adjusting to remote working and distributed teams.

However, how much of that is really down to experienced teams who were already in place continuing to manage the status quo? What will happen when firms need to onboard new staff or kick off new projects?

On the assumption that we don’t fully return to old ways of working (and banks like the idea of improving ROE by offloading expensive real-estate assets), then firms will face two challenges. Firstly, the need to adopt technology that supports a distributed organisation – such as the modular, interoperable tech discussed above, but also increasingly cloud, which finally seems to be gaining genuine traction in capital markets (ironically, the incremental, additive approach to tech projects we described will help accelerate adoption).

And secondly, the need to create a new ‘learning culture’ within organisations that will no longer be able to rely on day-to-day interaction in the workplace to build the knowledge, experience, and personal networks of new or junior staff.

And, incidentally, the new Gen Z hires will have a completely different expectation of how they expect technology to support them in their jobs.

One thing we all agree on is that it will take a change in attitude and approach to address the technology challenge. Both from the viewpoint of customers and whether they can evolve their organisations to become more agile and focus on continuous incremental change that drives sustainable innovation. But also, whether technology firms can genuinely embrace openness and interoperability – not just through a set of technical specs, but from a business philosophy that proactively sets out to achieve successful collaboration and partnerships.

Watch the full video here or subscribe to the FinTech Focus TV YouTube Channel here.