Welcome to another day in our digitally-driven world: an abundance of mobile banking solutions surround us, businesses strive to stand out from the increasing competition, and end-client demands rise by the second. Especially as the digital native community grows and market globalisation takes new dimensions, investment banking software inevitably gain significance and revolutionises whole sectors.
Working in a bespoke software development company, I get the chance to closely observe how technology advancements change and shape our modern days at fast rates. Never in the history of humankind were investment and banking services as a whole so accessible for the community. This democratisation of banking doesn’t only provide a fair share of opportunities to marginalised people but also leads to the creation of many new subsectors such as InsurTech, FinTech, Neobanks, Cryptocurrencies with exciting future use cases. Read further to find out more about how software solutions helped revolutionise the investment banking industry.
Core Business Areas in Investment Banking
The top three primary service areas of banks are credits, lending and investments. Whether a bank works with giant corporations, governments or is concentrated on smaller individual clients, most probably it has an investment department responsible for sales and trading (S&T) and all related commercial activities. These may involve physical commodities such as oil and gas but also products like bonds, stocks and shares for a profit.
The key business domains in Investment banking encompass equity research, capital raising, mergers & acquisition (M&A) deals, S&T and asset management. Investment banks might also provide financial advisory and consulting services to their clients. Most modern banks also offer investment portfolio management, customising it to secure maximum profit for their clients. With lots of clients switching to mobile banking nowadays, the huge interest in digital wallets and online portfolio management is here to stay.
The Role of Emerging FinTech Startups
Now that you have the bigger picture of what the investment banking industry is doing, imagine all these products and services being available to you 24/7 just a few clicks away. Covid-19 acted as a powerful accelerator for new trends entering the business landscape, and investment banking is no exception. Moreover, the new players promise advanced self-service features, speedy money transfers, virtual support and robust security for just a fraction of the usual fees. The most important aspect is that, usually, new financial technologies live up to the high expectations thanks to the help of experienced software developers, paving our way towards a brave new world.
But what about traditional banking institutions? Developing FinTech mobile applications is a feasible move for them to embrace digital transformation and stay in the game. This enables established banks to stay relevant and competitive and also to have the shaken faith in them renewed. However, the real disrupters here are FinTech startups that occupy the digital arena with extremely low entry barriers for end-clients: Internet access and a smart digital device and you’re ready to set up an investment or trading account within seconds.
Challengers, Digital-Only & Neo Banks
Lots of what we use to call “normal” have probably changed forever with no turning back but a change equals a chance. A chance for the investment banking industry to provide more high-quality services, promote inclusive digital solutions and make the world a better place. One way that software has changed this sector is by facilitating the efforts of each institution to adapt to the dynamic environment we all live in. That’s what opened the doors for newly formed bank types.
Neobanks are a new type of direct banks, also called “challengers”, that work exclusively online and without any traditional physical branches. The processing of financial services happens via a website or mobile app. Other names for the concept are online bank, pure internet bank, virtual bank or digital-only bank. Challengers usually come fully equipped with lots of investment options such as digital stock exchange, commodity or cryptocurrency trading. Good examples of such neobanks are popular FinTechs like Revolut, Atom, Monzo, or Wise. Currently, technology allows lower software maintenance costs, which causes neobanks to charge lower fees, slowly making traditional banking a part of history.
Blockchain Technology as a Major Disrupter
With blockchain-based virtual products like crypto or NFTs flooding the mass media, it is no surprise that it really time for a change. Earlier this year, a Goldman Sachs’s article even revealed that the company has co-led the first public digital insurance on Ethereum for the European Investment Bank. Among the discussed benefits of blockchain here are cost reduction, greater transparency as well as boosted transaction speed and efficiency.
From a purely technical point of view, blockchain technology represents a distributed transaction database. One of its unique features is its structure: it grows as one digital block is attached to the other. Therefore, each individual block has exactly one chronological predecessor and one successor. There are no more connections between the blocks and once created, the connections with the previous and following blocks can’t be broken. Taking data security on a whole new level, the blockchain data is not stored on one server. Instead, it is shared between multiple ones and all participants in the networks or “nodes” have a complete, 100% identical copy of the complete blockchain available in their local memory.
The Future of Investment Banking
The near future of investment banking is surely a digital one. Empowering the industry with Artificial Intelligence (AI) might still be at its early stages but the vision is that this technology is capable of drastically changing investment operations. Let’s just mention the enhanced trade processing speed and accuracy as well as automated financial data collection made possible by bespoke software solutions.
With AI algorithms getting better at predicting market fluctuations and analysing worst-case scenarios, many exciting things are about to happen sooner than expected. According to Deloitte research, predictions are that banks of 2030 will embrace a new connected flow model, which will further simplify the client-centric approach, adding additional efficiency, agility and cost stability. It is just a matter of years until software solutions completely revolutionise and change the investment banking sector for the better.