New Trends in Finance: Digital Transformation in Banking | Can Investment Banking Successfully Embrace Digitalization?

Financial services take a lot of time for digital transformation, as advanced technologies dramatically change the way the industry operates. AI, machine learning, and robots are fundamentally changing the industry and it is time to fully embrace the amazing opportunities they have.

With the strong integration of the major competition from the fintech (financial technology) sector, the heavy regulatory burden, and the recent coronavirus pandemic that directs consumers firmly to their Smartphones and laptops, the issue of commercial banking transitioning to digitalization has become more widely known and widely publicized. But it is not just within the confines of banks that meet such challenges. At the opposite end of the scale, the same is true for an investment bank.

Over the past few years it has been seen that the investment banking space has undergone major changes in terms of changing consumer expectations, industry trends that promote greater financial and democratic investment, and more stringent legal requirements. In stock exchanges (ECMs), for example, high regulatory and reporting costs have consumed revenue generated from IPOs (public offering), leading companies to be more prone to secrecy. Indeed, there has been a significant decline in the number of companies going to the public compared to the last 20 years. In addition, there are now many fundraising models, attracting some large unicorns away from the traditional model offered by investment banks thereby reducing their ability to lead.

Investment banking is also facing stiff competition from fintech companies that can now hold a growing portion of the business with customers from the traditional area. Price and transaction data, for example, has historically been in the hands of the retail sector, such as investment banks, and has remained unequal to customers.

This has helped banks to manage their inflation and thus have become a major source of revenue through the high transactions and broad distribution of prices. But today, the advent of digital can incorporate easy data transaction data, which means they can overthrow the dominant power over the prices held by investment banks. As Deloitte recently acknowledged, “the trend towards greater transparency in pricing and transaction data will continue”, which reduces or eliminates the need for the average person in most cases.


“These businesses thrive and provide remedial solutions that can be offered or provided by investment banks in a limited way,” Accenture said in 2017. “P2P funding has also eliminated the need for retailers or investment banking services. As these other service providers are gaining popularity, funding from securities, lending, payment and investment services for traditional investment banks has stalled.”

Indeed, there is already a growing trend towards a complete overhaul of the investment bank when deals are made and terminated. In 2016, for example, Comcast Corporation acquired DreamWorks Animation for approximately $ 3.8 billion and handled all negotiations related to this agreement without the involvement of foreign investment business. Spotify has also been able to write publicly and determine its opening price based on the volume of orders it has received, thus eliminating the need for investment banks to participate in the process.

“Companies are developing strategic partnerships with consulting teams as a model for self-employment,” according to financial services research company Acuity Knowledge Partners. “This allows them to adapt and to act quickly when necessary. Important, and it saves them from paying high fees, wherever they can. Companies hire former senior bankers from leading investment banks as fast-moving strategists to speed up and close transactions quickly. ”

In addition, the coronavirus pandemic has only exacerbated the need for banks to make radical changes in their investment business models, with payments from traditional units such as ECMs, consolidation, acquisitions (M & As), and major credit markets (DCMs) down sharply during the year. -2020. Therefore, there is a growing urgency for business investment strategies to change, especially to help clients cope with the economic downturn but also to adapt to new financial resources in this challenging market time of high demand, rising bad credit, and high-interest rates.


Digital innovation is very much dependent on the heart of such a revolution. Outbreaks of coronavirus and anti-social behavior practices around the world have meant that digital tools have become a way of business to ensure that they can continue to operate without interruption and that their employees can work remotely. “In many investment banking institutions and large financial markets, this challenge only builds on the strong competition for cash flow and cash and the pressure pressures they face while meeting high customer expectations,” Deloitte said recently.

In embracing digital innovation, many thought leaders see it as transforming their savings systems or creating separate opposition businesses as effective ways for investment banks to become more sophisticated. “While the construction of a completely new bank is attractive because it allows CIBs [corporate and investment banks] to use the latest technology and avoid asset constraints, building a new bank is a daunting task that can take years to measure,” the Boston Consulting Group (BCG) noted in March 2020. it also acknowledged that those institutions are well aware that it can take several years to complete the transformation of traditional IT (information technology) and that the results could eventually fall short of customer and user expectations.

That said, investment banks do not need to undergo radical internal change if such work requires significant time and expense. As banks face increasing competition from the most economical and flexible digital startups with the most transparent digital infrastructure, existing bank behemoths are less likely to be able to overcome them simply by implementing their internal restructuring plans. Instead, some may choose to create a “partner environment” that can close important service gaps in their positions and reduce the cost of their facilities. BCG has identified three examples of this cooperation:


  • outsourcing one or all of the banking IT and the performance of ecosystem players, such as security services firms, moving resources towards more value-added jobs,
  • create a model of shared services with other regional banks to integrate IT and staff,
  • in building partnerships with commercial or primary enterprises in order to maintain market share in the most common trading activities.


Compared to historical infrastructure, in addition, Acuity Knowledge Partners identifies digital platforms that affect investment banks through historical transaction information, provides interactive scenarios used in customer negotiations, provides data visibility, and performs new analytics. “Overall, this builds efficiency, provides in-depth understanding and analysis, performs general functions, and empowers banks to focus their bandwidth on achieving multiple deals,” Acuity said recently.


Deloitte identified four key elements in investment banks to bring about a successful digital transformation:

Controlled program management: Management strategies to increase efficiency, including identifying the main product owner, establishing an advisory council, establishing a building board with technical experts, and building a track record of a new and faster search;

Clear business definition: A people-centered planning approach that builds on the basis of a deeper understanding of the user, clearly defines user needs, and describes future developments that address broad opportunities;

Delivery of practical technology: The challenges you can expect include managing the visibility and availability of deals and records, determining the appropriate integration tool for the organization, providing a complete overview of all available information, and managing data and communication data resources;

Readiness to own: This may involve conducting periodic disaster assessments to identify gaps in awareness, using a platform to work with ideas to identify features and measure audience perceptions, and understanding business outcomes respected by senior management.

Looking ahead, it seems that investment banks will continue to have sufficient barriers to entry in order to maintain market share in the long run, examples of which include high financial requirements, expensive regulatory responsibilities, bankers’ own skills, and long-term term-customer relationships. many last for a few generations.

That said, Deloitte emphasizes that those who wish to invest in the future amidst volatile market changes should consider abandoning more expensive internal infrastructure and move to a connected flow system where external providers provide critical and non-critical service services. “In this new environment, the investment banker’s ability to create and use different data perceptions becomes its new competitive advantage.”

Ultimately, a certain level of renewal of older business models will be needed for the space to survive and, in fact, to prosper in the long run. This will include adopting technologies such as artificial intelligence (AI), learning technology (ML), and natural language processing (NLP) to create digital platforms that can ultimately affect banking performance, customer coverage, and data analysis. And while reorganizing the internal environment to integrate digital technology may be a resource-intensive process, it seems clear that it is very important for an investment bank to maintain long-term competition, increase customer awareness and make better use of data to make the right decision.

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Javier Niskanen is a crypto investor who is passionate about helping others achieve success. He has a background in computer science and has been involved in the crypto world since early 2017. Javier is excited to see how blockchain technology will change the world for the better.

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