Listen to the Podcast:
According to a recent Gartner report, global IT spending is projected to reach $4.5 trillion by the end of 2023. With such rapid growth, it’s clear that digital technologies have impacted nearly every aspect of our lives. including the banking industry. Banks are advancing at an unprecedented pace due to the rise of fintech and new regulations globally. To stand out in this highly competitive environment, professionals must keep up with investment banking trends. This is where a banking software development company can come in handy and help you ride the wave.
In this article, Geniusee experts provide a concise overview of the top investment banking market trends that are thriving around the world. Today, it is essential to keep abreast of recent industry implementations that can change not only your business but the entire operating patterns of the banking industry.
Artificial Intelligence (AI)
Various firms use specialized learning techniques to identify and predict potential successful investment strategies for their clients. This is one of the ways that AI has transformed the FinTech industry. Another important way is through their effective fraud detection and credit scoring algorithms. AI can detect fraudulent transactions in advance, minimizing investment scams. Additionally, smaller FinTech startups with limited consumer data can use AI to accurately assess credit scores and repayment ability and offer unsecured loans. An example of AI being used for investment strategy identification and trade execution is Man AHL, a London-based company that automatically trades various global financial markets.
Direct listing technology
In recent times, more and more business models are opting for direct listing to raise capital instead of IPOs. With IPOs, companies must hire underwriters who facilitate the IPO process and charge a fee for their services. Direct listings are a more attractive option for those who cannot afford subscription costs or are unwilling to share dilution or face lock-in periods.
As a result of this shift to direct listing, there is a growing demand for technology platforms that can help small and medium-sized businesses through the entire process. It is reasonable to anticipate that a variety of out-of-the-box disruptive technology solutions designed specifically for direct listings will emerge in the near future, saving companies millions of dollars. Spotify and Palantir are great examples of companies that have opted for direct listings over IPOs.
Natural Language Programming
With the help of AI, Natural Language Programming (NLP) is improving the interactions between computers and human language. NLP helps investment analysts turn unstructured data into measurable, structured data at a much faster rate than ever before. It has the potential to parse annual investment reports, investor calls, and regulatory statements into easily understandable information. Due diligence teams have widely adopted NLP for faster information processing, increasing the efficiency of an otherwise time-consuming activity.
An excellent example of the use of NLP in the investment industry is FinBERT, which employs pre-trained language models to perform financial sentiment analysis on specific data sets. This analysis predicts how the market will react to certain information in terms of stock price fluctuations.
virtual data rooms
VDRs are an excellent solution for banks that store sensitive corporate data virtually, especially with the increase in cyberattacks. They are especially useful in the context of storing information about deals for mergers, acquisitions, and initial public offerings. Access to this information is strictly limited to the relevant parties, leading to higher productivity, better security, and better compliance with regulatory requirements. It’s worth noting that tech giant Amazon makes just 30% of its revenue from retail operations, with the rest coming from its virtual data services provided through AWS.
Open Banking offers several key benefits, such as customer-centric banking implementation, better quality of customer service, and a more convenient format for services. One of the main challenges that Open Banking must overcome is “data slavery”: traditional financial institutions hold customer information, preventing innovators from entering the market. This also limits the ability of consumers to select the most suitable and cost-effective services. Open Banking helps to minimize, if not completely eliminate, the problem of data slavery. Open protocols allow all market participants to use the information collected.
Open Banking is more of a threat than an asset to traditional financial institutions. Investment banks must share information, which breaks their monopoly. However, looking to the future, they provide a catalyst for development. The need to share data and compete in new conditions fuels the creation of new services, innovation and better customer experiences.
Sustainable Finance Products
Sustainable financial products are a range of financial services that encourage organizations to consider long-term environmental, social and governance (ESG) criteria in their business decisions. These products aim to provide more equitable, sustainable and inclusive positive outcomes for businesses, local communities and society as a whole. The incorporation of environmental, social and governance factors into investment strategies and the increasingly accepted idea of inclusive capitalism or capitalism for all stakeholders are some of the most obvious forms of such financing. Furthermore, in the context of climate change, sustainable finance plays a critical role in financing the transition to a future with net zero greenhouse gas emissions by 2050.
The financial services industry is witnessing an increase in the adoption rate of blockchain due to two key reasons. First, it eliminates intermediaries in fund transfers and allows for peer-to-peer transactions. Second, blockchain technology is very secure and resistant to unauthorized access or fraud.
However, despite its usefulness, blockchain has not seen growth as fast as AI or machine learning due to its complexity, making it difficult for the average consumer to understand. Additionally, the lack of regulation in most of the world for cryptocurrencies has led to a lack of trust in blockchain transactions, making mass adoption difficult. Several cryptocurrency wallets, including DDKOIN and OKEx, actively take advantage of blockchain technology to process, hold, and transact cryptocurrency for users.
Investment banks have shifted to offering digital services to their clients, with most of them offering mobile apps that provide access to real-time market data, market intelligence, investment banking industry reports, and more. These apps allow users to create custom dashboards and share data directly with their representatives. With the development of more APIs, these apps can be seamlessly integrated with other trading apps, providing a richer trading experience. While Acorns and Affirm are two popular apps that offer investment-related and financial services, many others in the investment banking space provide similar services.
While keeping up with the latest investment banking trends can be beneficial, applying them correctly is just as essential. Even with the most advanced financial technology, it may not be enough if you don’t use it effectively. Partnering with a trusted FinTech software development company could be the key to achieving unicorn status in the investment banking industry. If you need help, Geniusee is here to turn your ideas into reality.
Subscribe to our latest newsletter
To read our exclusive content, sign up now. $5/month, $50/year