Capital Markets Insights

3 Technology Trends Shaping Private Capital Markets

In today’s highly competitive private capital markets, every organization is facing the pressure to automate, digitize and optimize their internal processes. The ever-expanding cross-industrial digitization generates a lot of inputs that are being processed in order to increase the quality of service these companies offer. Coupled with frequent changes in the regulatory landscape, as well as the fact that new technologies emerge almost on a daily basis, it is evident that there is pressure on capital market firms to adapt quickly, and at low costs.

Manual tasks and inefficient internal processes are still relied on for key tasks in many organizations; due to the fact that human action in this regard is often repetitive and dulling, it leads to frequent errors and oversights. Still, most deal execution and discrepancy settlement tasks, for instance, are handled manually. This is a time-consuming process, which is also labor intensive, and expensive. Precisely for this reason, a wide plethora of capital market firms are turning to FinTech solutions that can help them deal with automating these processes and mitigate risks without compromising returns.

Software platforms designed for capital markets can help in streamlining complex workflows, ensuring compliance and reducing costs, thus generating better returns. This means generating all the necessary documentation automatically, providing adequate guidance to investors active on the platform, electronically processing subscriptions and real time tracking of deal status - all while operating from enterprise-grade safety of the cloud.

Influenced by the transformational capabilities of these technologies, FinTech development trends point to adopting and utilizing Cloud tech, platformifying operational procedures so they can generate new customers and revenue, and implementing microservices in order to improve the company’s agility and workflow.


Cloud tech - a way to drive operational efficiency

Capital market companies are facing severe economic challenges - low interest rates, stringent regulations, and increased capital requirements with high margin pressure. Cloud technology can enable firms to be agile, to quickly react to external changes with reducing upfront capital expenses.

Companies are faced with the need to meet growing customer demands for real-time data insights. Cloud tech is a neat way to seize the opportunity to improve organizational decision making by accessing real-time data and improving data sharing.

This is not a novel thing - adoption among capital market firms is accelerating, with companies increasing cloud spending in order to access new sources of business-critical data to make better decisions. Public cloud investments will represent roughly 47% of IT budget for capital firms this year, ranging from small hedge funds to large banks. Additionally, capital market firms are adopting cloud infrastructure to realize costs efficiencies and improve data processing capabilities.

The impacts of this are palpable - it drives down tech and infrastructure costs and frees up funds for business processes and revenue generation. It also allows firms to break data silos across various processes and pool utility data leading to improved decision making. Cloud enables companies to employ analytics and business intelligence applications on their data to gain actionable insights.


Platformification as a path to generating new customers and revenues

FinTechs have stirred the established capital markets’ status quo. Incumbent firms may lose customers if targeted products and services are not provided. Platformification fills this gap - it allows firms to meet evolving customer demand for digital experiences via a plug-and-play service delivery model. This reduces the burden of developing new products and services by effectively ensuring the ability to offer a wide range of third-party services in order to meaningfully engage customers.

This reduces the overhead costs of doing business for the firms, by decreasing the need to divert funds to develop in-house solutions which are costly and not always attainable due to limited capabilities and the varied nature of these applications. In addition, customers would not have to make multiple data entries and engage multiple providers to gain varied services.

Capital market firms will have shorter development and deployment cycles for new tech, all the while ensuring that their customer data safety is not compromised. Connecting with external systems and taking advantage of new platforms, in order to get access to new customers and streams of income, also aides with responding to often regulatory changes and the rise of open architecture.

Microservices improve firms agility and workflow

Technological obsolescence is making agility critical for capital markets - every moment of downtime represents lost dollars. Companies cannot afford operational shutdowns or interruptions while systems are being maintained or upgraded. This trend is also facilitated by frequent regulatory changes that have given rise to a need for firms to develop tech applications that can quickly assimilate and implement changes.

Some companies are developing separate apps on a single interface so as to decrease internal dependencies, and ensure ease of maintenance and updates while not affecting overall system work and stay on top of tech trends. Others are mixing up their software deployment strategy to adopt microservices architecture, resulting in reduced coordination efforts between teams and facilitate faster software development.

Using microservices significantly reduces large-scale disruption of overall systems caused by single-failure points and allows firms to decrease internal system dependencies. Overhead firm costs can also be reduced as teams and systems are redirected to perform similar functions across different departments. All of this allows capital market firms to be more responsive to regulatory changes and tech trends, and to roll out dynamic changes to current systems without affecting normal workflow, resulting in lower costs.