During the past three or four years, most CIOs and their technology groups have been focused on reducing cost, simplifying application stacks, and helping the business meet numerous regulatory mandates. In other words, IT has been busy with everything but what technologists really love to do: build new and innovative technology.
That is a broad generalization, of course. But by and large a great deal of effort and focus have been dedicated to compliance initiatives and finding ways to reduce costs. Some of the ways firms are reducing costs are actually quite innovative, such as moving applications to the cloud and reducing the reliance on costly proprietary data centers. In the same way, meeting regulatory requirements has also forced financial institutions to rethink the way they approach risk management, data security, and data management. If done correctly, data management and risk analytics initiatives can also benefit the business by providing meaningful insights into customer demographics, new products, and investment or trading opportunities.
Wall Street & Technology's Capital Markets Outlook 2015
Here are 10 topics that will be a focus for financial institutions in 2015 and beyond:
- Technology Innovation Returns to Financial Services
- Global Banks Need to Demonstrate RDA Progress in 2015
- Where Should You Spend Your IT Budget in 2015?
- Financial Firms to Struggle With Growing Social Infrastructure in 2015
- As Market Matures, Fintech Startup Winners Will Emerge in 2015
- Universities Increasing Programs for Data Scientists
- Next Year, Aim for Communication & Clarity of Cloud Apps
- E-Trading Disruptors Seek Untapped Liquidity in Corporate Bonds
- Swap Markets Debate Anonymous Trading in SEFs
- The Clock For Market Structure Change Is Ticking
- Increasing Cyberthreats Pose Massive Challenge for Financial Firms
In 2015, it seems that compliance, data security, and regulatory mandates will still dominate the agendas of most technology leaders. Many Dodd-Frank rules still need to be completed by the SEC. The SEC is also doing a complete review of the equities market structure, which will likely force additional technology changes in the future (just as Reg NMS a decade ago spurred a trading technology boom). When it comes to security, the SEC, FINRA, and some individual states have announced that cyber security audits will be increased in 2015. The CFTC has finished most of its Dodd-Frank rule making, but complying with the rules will take a little longer. And lastly, the Basel Committee on Banking Supervision’s "Principles for Effective Risk Data Aggregation and Risk Reporting," also known as BCBS 239, has a deadline of January 2016. Data and risk management experts will spend most of 2015 moving toward compliance.
Even with the seemingly endless compliance initiatives that have soaked up time, resources, and budgets, financial firms have started to look at what new technologies could help the bank transform its business. Following a few years where technology innovation was most definitely on the back burner, in 2014 many banks started to reinvest in new technology that will help build new products, attract new customers, and more.
One of the hottest and broadest topics has been digital transformation in the enterprise, which refers to challenges and changes associated with the application of digital technology and products across the business. By using data analytics to uncover new opportunities, mobile apps to meet customer expectations, social media tools to respond to clients or to mine social media for sentiment analysis, and a host of other emerging technologies to transform the business, financial firms certainly have their hands full. No longer can traditional financial firms sit on the sidelines and ignore mobile as a consumer tool, or social media as just a "nice to have” connection to the world.
BNY Mellon, for example, opened a fourth technology lab in Silicon Valley to accompany a lab in Jersey City, N.J., and two in India. The labs focus on building newer applications and tools, such as wearable computing (Google Glass, Pebble Smart Watch) for investors and data analytics tools to mine the company’s massive existing data repository.
Fidelity Investments, which spends approximately $2.5 billion on technology annually, also devotes a small amount to its Fidelity Labs unit, which devotes its time to exploring technology that may be useful to the bank in the near future. Most recently, it launched a virtual reality investment analysis tool called StockCity on Oculus Rift. The lab also has current beta projects with smartwatch apps, Google Glass, a secure cloud-based financial document storage service, and some data visualization tools.
BNY Mellon and Fidelity are just two financial firms. Many other banks are also investing in newer technology and tools to help transform their businesses and move forward after a few years of limiting investments in newer tools. As you can see from Wall Street & Technology’s Capital Markets Outlook 2015, our annual look at the topics and technologies that will be a focus of financial firms in the coming year, many of the projects have an “innovation” angle to them. In 2015, firms will be busy managing social media programs, searching for data scientists, tapping into the financial technology startup community, continuing to build mobile apps, and harnessing the power of the cloud.
While our list of topics isn’t all-inclusive, and we have no idea what 2015 will bring (will the economy continue to grow, will the bull market continue?), we are seeing a much needed return to innovation across financial services. Some of the new ideas and tools are piggybacking on compliance initiatives (data analytics), while others are straightforward investments in innovative ideas, such as social media management or mobile apps. Either way, it’s refreshing to see innovation becoming a priority for financial leaders.