Accelerating digital transformation in capital markets

In capital markets, technology is increasingly critical to meeting the digital expectations of investors and putting investment strategies to work. But the road to digital transformation can be hard, and it takes extensive groundwork, strategic direction and expert guidance to reach one’s objectives and get the best from modern tech.

Digital transformation ahead for capital markets data

For capital markets firms, the fundamental goal of digital transformation is to be able to do more with data. Thanks to advances in artificial intelligence (AI), buy- and sell-side institutions alike can collate and analyze massive data sets more rapidly than ever to improve insight for trading and investment decisions, risk management and compliance, and investor reporting.

Technically speaking, however, there are foundational steps that firms should take before reaching this stage of their digital journey.

The capital markets industry still has a lot of work to do to modernize its IT infrastructure. Many firms continue to run multiple legacy systems on their premises, which considerably limits their ability and capacity to support, for example, the latest large language AI models or data warehousing solutions.

If you want to take full advantage of next-generation digital technology, you should consider moving as many platforms as possible to the cloud.

Access all areas in the cloud

Without a largely cloud-based technology stack, it becomes difficult, if not impossible, to digitally transform at scale and provide the digital experiences and easier access to data that capital markets customers and platform users increasingly expect.

Put simply, the cloud gives you the modernized core foundation you need to run digital technology effectively and for less cost. And with software-as-a-service solutions, you don’t have to worry about upgrading the software or ensuring you are on the most current version.

Organizations are feeling the positive impacts of going digital in the cloud. In the 2024 FIS Global Innovation Research, which surveyed 2,000 financial and nonfinancial firms, 38% of C-level executives say that embracing cloud computing as a part of digital transformation would highly impact their business operations.¹

However, digital transformation doesn’t happen overnight. Capital markets operations may have come a long way in the past four or five years, but there is still a lot further to go. The priority for organizations is to recognize where they are in their cloud journey and define where their digital road map will take them next.

Before you start thinking about how to deploy the latest tech, including generative AI, you should not only lay the foundation you need to underpin these innovative tools, but also set clear objectives for what you want them to deliver.

In other words, do not modernize for the sake of it; determine the specific use cases where technology will make the most impact.

Bumps in the road to digitalization

The lack of a modern underlying technology stack is just one obstacle to digital transformation. Another is the potential cost of transformation projects.

All capital markets firms face cost pressures, but in areas like lending, intense competition and the homogenous nature of products make it important to improve margins by keeping capital expenditure down.

Many organizations are understandably overwhelmed by the opportunities that technology presents. It is easy to lose strategic focus and make piecemeal investments in innovation without having anything to show for it.

As a result, some capital markets sectors are further ahead than others in the drive to digitally transform their business and their approach to handling and analyzing data.

To date, data-intensive businesses, like commercial lenders and asset finance providers, have embraced modernization. And across the sectors, treasury functions within organizations have typically been faster than the rest to harness the power of technology to improve visibility and insight. For asset management firms, traders and portfolio managers in the front office have also shown interest in utilizing modern digital technology.

But in the middle and back offices, there is still a predominance of homegrown legacy solutions that stops even the biggest players from leaping to the next stage of their digital journey.

With so much data flowing into and across their organizations, asset managers should urgently modernize how they connect different data sources and move data between them for their teams – and their customers – to consume. The accuracy of their accounting, reporting and analytical processes depends on it, and so do the efficiency of their operations and the experience they can offer end-investors.

But with some foundational work on their IT infrastructure and a solid roadmap for digital transformation, firms can quickly get ahead of their competitors and make optimal use of data without increasing costs.

Advancements in user experiences

Ultimately, anyone who interacts with a capital markets’ IT platform will benefit from a digital transformation, whether they are employees or customers. If you cannot meet the digital expectations of these end-users, then your technology is not doing its job.

To get money working harder, you must do more with your data than was possible in the past and make it easier to orchestrate, access and consume. That is a lot to ask of the user experience but something that innovative digital tools are increasingly able to deliver.

As a relatively mature next-generation technology, chatbots are easy to deploy, deliver fast benefits to end-users and give a clear sign that you are investing in innovation. But other tools are fast catching up to help firms provide more efficient and tailored digital experiences.

Globally speaking, the use of personalized interfaces and personalized marketing tools is higher in Hong Kong than in the U.S., U.K. or Australia. At the leading edge of financial services innovation, Hong Kong also claims the highest usage of predictive analytics, which are utilized by more than 60% of its business leaders. ¹

However, in Singapore, where there is likely more regulatory oversight, only 39% of leaders use predictive analytics.¹ With regulation of digital technology advancing almost as fast as the technology itself, Singapore’s more cautious approach to adopting the latest tools reflects the need to strike a balance between meeting digital expectations and avoiding legal complications.

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The ecosystem-driven way forward

The operations of capital markets firms are complex, so there is rarely just one platform or source of data that you should digitally transform. Multiple users – inside and outside of your firm – will also use your data, which means meeting a range of digital expectations.

As you approach your digital transformation and design your digital road map, think about your technology in terms of an ecosystem, where different platforms must slot seamlessly together, easily exchange data and satisfy different users and use-cases.

Plus, work with the right technology partner, a vendor that understands the different areas of your capital markets business and has the tools you need to achieve their different objectives and unlock the most insight from diverse sets of data.

With the right technology underpinning your ecosystem, a clear way forward for innovation and an expert guiding the way, your digital journey can help set you on course for competitive advantage.

¹FIS, Global Innovation Research 2024 surveyed 2,000 firms across financial services and other industries in the U.S., U.K., Singapore, Hong Kong and Australia.