How digital transformation could change investment banking


The banking industry is transforming, driven by the dual forces of digital transformation and the COVID-19 pandemic. The software revolution is bringing about rapid changes in the financial services industry, and by incorporating the relevant technologies, banks can bring about the maximum value for themselves and their customers too.

The impact of COVID-19 is being felt everywhere. Its spread in the investment banking industry means an increasing number of firms facing operational and strategic disruptions along with dampened customer demand, thereby missing financial targets. And given the likelihood of an extended impact, it would be wise to prepare for the long term.

Digital transformation in investment banking remains slow. What is missing is a comprehensive strategy covering value offered, creating growth and customer satisfaction through end-to-end customer-centric processes. A key differentiator here also remains the fact that no deposits are taken, and firms function as facilitators between buyers and sellers, all the while keeping their data protected.

The advantages for banking professionals are many. There is more transparency of data, and alternative means of accessing financial and intellectual data become available. No more intermediaries remain in the process, and they can offer lower pricing plus simpler and quicker transactions. Other advantages include the following:

  • Convenience: Customers can access their personal or company accounts off almost any device connected to the Internet, and this is possible from home or any other place with Internet access. The ability to constantly track account balances and manage the details of personal banking profiles – such as updating contact information – helps to increase customer satisfaction. Bank visits for many common transactions also become a thing of the past.
  • Service round the clock: Online banking implies access to banking services outside of regular banking hours, negating the requirement of dealing with long queues. This also implies a huge saving in time, cutting down the hours that might be needed for simple banking transactions to a matter of mere minutes.

There are also a number of challenges for the investment banking industry. Small investor groups on one digital platform could well take the place of investment banks, taking out entry barriers. Some other challenges are as below:

  • Competition from non-financial institutions: In the banking field, Amazon is working on banking opportunities for its customers, and Facebook allows direct transfers by its users into other bank accounts without having to go through bank interfaces. Investment banking could face a similar situation too, though as of now, it still offers the advantage of being more regulated and thus more secure.
  • Fast-changing technologies: Online transactions are facilitated by technology that must be constantly updated and kept at an efficient level of security. Cybersecurity remains a major issue for banks to consider, and requires a detailed counterstrategy incorporating a mix of appropriate technology tools and a professional, qualified team that can work with these tools to move to the reality of a secure transactional environment.
  • Constant transformation: Technological enhancement means this is a given, and requires constant updating of systems. New services will come up as new technologies appear, and these too will need to be upgraded and supported over time.

The above imply that the investment banking industry must develop a detailed strategy to change its distribution model, enhance the value offered to its customers, and develop end-to-end customer-centered processes that boost satisfaction and aid growth. The following technologies could aid this process:

  • Artificial intelligence (AI): This could help solve customer issues through chatbots or other virtul assistants, along with analyzing data to maintain security.
  • Blockchain: This offers a better interface along with improvements in accuracy and security of data and transactions.
  • Internet of Things (IoT): This facilitates real-time data analysis, allowing banking professionals to tailor offers as per specific customer needs. IoT could also enhance authentication through biometric sensors.

The transformation of investment banking will not be quick, nor will it be low on resource requirements. The end result, though, will be better services and thus more customer satisfaction.

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