Digital strategy illustrates a business’ appetite and commitment to innovative technological change. With regulatory compliance consistently heading up the budget within the investment banking sector, an effective digital strategy has emerged as top priority for the retail banking industry. Up against stiff competition, and driven by consumer demand, the retail banking sector has had to adapt and evolve their services to differentiate themselves from both traditional rivals and new joiners to the market offering digital and e-commerce services.
As we continue to see a steady flow of new and complex regulatory requirements post the financial downturn in late 2000s, most investment banks have met these requirements with business-incentivised post-trade services. Consequently, investment banks are offering common regulatory compliance services, which are no longer a differentiator but an expectation. The challenge for investment banks is how to deliver these services in a way which stands out. Digital technology is the way.
The five reasons why investment banks should adapt their digital strategies to be comparable with their retail banking counterparts:
- Investment banks are notorious for their IT investment. However, spending is largely directed towards the maintenance of legacy systems (out-dated systems). Investing in out-of-date technology can be analogised to “teaching an old dog new tricks”. One answer lies in the rapidly expanding FinTech sector working with investment banks to lower legacy costs and deal with regulatory requirements.
- Rather than looking to off-shoring and near-shoring solutions, automating technology supersedes this requirement, while also reducing operational risks, e.g. human error, and providing future scalability. Leveraging FinTech solutions reduces the time to market and cost of investment.
- Retail banking, now more than ever, revolves around the customer and their experience dealing with their service provider. Investment banks should look to leverage the experience of the retail banking industry by adopting a more client-centric focus. A rapidly growing global marketplace, and increased mobility through mobile and tablet devices and cloud computing should be key incentives for investment banks to improve their digital offering. With retail counterparts offering mobile and internet banking as standard, investment banks should centre their post-trade services around client-experience, providing easily accessible real-time trade lifecycle dashboards, namely to cover and illustrate complex confirmation, reporting and clearing requirements.
- Allowing the consumer to interact directly with their broker using digital technology removes a tremendous amount of workload (and therefore FTE) for the latter. If a consumer is able to view and query the critical path of a trade, the initial investigation into a break can be carried out by the consumer themselves, leaving only the steps to resolution in the hands of the service provider.
- A digital bank is a green bank. Environmental awareness is not only a legal requirement, but also a powerful sales tool. A consumer will always feel more comfortable and justified investing and interacting with a bank focused on digital advancement and removing waste (8 wastes of Lean).
Justifying spending on long-term technological solutions and being faced with a thickening regulatory landscape and increasingly competitive market will prove a challenge for investment banks. Digital strategy used to be a “nice-to-have”, but its fundamental nature is becoming more and more apparent. Investment banks should strive to meet the needs of the modern-day consumer, and to stay one step ahead of their competitors. The challenge ahead is to employ an integrated approach to the logistical implementation of a bank’s digital strategy, to ensure a smooth and controlled transition.