Bankers, brokers and traders see strong opportunities for lean, agile, tech-driven firms, and say that larger firms must better prepare for mounting regulatory pressures, technological advancements and other future industry disruptions in order to compete.
That’s according to a new global survey published by FIS, a global leader in financial services technology.
The annual report, which surveys nearly 500 senior-level commercial, investment banking and broker-dealer executives to gauge their opinions on the future of the industry, found that most believe regulation poses a major impact, and that it isn’t being addressed with sufficient investment.
If a firm addresses such challenges head-on, however – as many highly automated, technologically driven firms already are doing – respondents say it faces a number of opportunities for growth.
The survey revealed that more than three quarters (77%) of respondents expect to be “severely affected” by increased regulations in the next 24 months. However, just five percent of respondents are increasing investment in compliance, and only seven percent in risk. Such a gap indicates a major disconnect between those acknowledging the risk posed by regulation and those responsible for addressing it. Meanwhile, the survey responses indicate that the industry’s slow and piecemeal adoption of modern technologies leaves it vulnerable to regulatory and operational risks.
“Business-as-usual is not an option for the banking industry. With a variety of new international regulations coming into force, commercial and investment banks and brokerages must brace themselves for an onslaught of regulatory and operational risks,” said Marianne Brown, chief operating officer, Institutional and Wholesale, FIS. “This is compounded by the need to keep up with disruptive new technologies coming to market, such as open APIs, mobile computing, artificial intelligence, and blockchain. However, big opportunities exist for lean, agile and highly automated new banking firms that can successfully harness the latest technologies to attract clients.”
Key findings:
- Three quarters of respondents (75%) expect regulations to significantly change their revenue model.
- Nearly four out of five (79%) expect algorithms to take an increased share of trading and transactional activities.
- More than four out of five (84%) expect increased automation to impact their business.
- Over a third of respondents (38%) have not upgraded the technology they offer to clients for two years or more, and nearly a tenth (9%) have not done so for more than five years.
The survey responses further indicate that a perfect storm of technological innovation, strict new regulations, increased competition and demands for improved trade transparency threatens to severely undermine existing revenue models.
