During the “Future of buy-side and sell-side engagement” panel discussion we held last week in midtown Manhattan, RBC’s Global Head of Client Insight, Banking and Technology Kim Prado stated that buying fintech solutions should be the preferred method for any firm because “it makes no sense to reinvent the wheel.” An article from Traders Magazine describes the efficiencies of working with OpenFin’s software as well as standards such as FDC3 across major banks and fintech firms. At this year’s TradeTech FX USA Conference in Miami, a number of panelists agreed that flexibility is the leading factor they’re looking for when examining fintech vendors.
The capital markets world is in constant evolution but more recently due to evolving economic models and regulatory oversight, including MiFID II, the relationship dynamic and the level of engagement between the buy and sell side is shifting. While both sides of the Street want to reduce friction, it’s not crystal clear yet on how that needs to happen. One unwavering consistency, though, is the need to employ flexible solutions which are able to quickly adapt.
Ten years ago, we’d go into a large firm that would have, on average, 7-10 different client databases and CRM systems across their organization. More often than not, there was a reluctance to consolidate them all, and to put these types of systems into the cloud. The aspiration of firms today is to have a single client hub enabling all of the desks to collaborate together to “deliver the whole firm”. The comments we’re now hearing are “why wouldn’t you move to the cloud?” and “if you could buy a proven fintech solution, why would you build the whole thing yourself?”. There’s a growing number of innovative capital markets fintechs that solve for different parts of the puzzle well. So the key is compatibility, interoperability and flexibility. Innovation leaders at capital markets firms want to add their own “secret sauce” to the mix. Purpose-built, cloud-based CRM products built on an open architecture is the foundation that makes this possible.
As changing market structures recast roles for buy-side and sell-side firms, flexibility is vital to success in this new climate. From our vantage point and experience helping clients evolve their processes and accelerate time to market, we see three key factors driving powerful change in their approach to client strategy: innovation, interoperability, and cost and risk reduction.
First, in capital markets, innovation is not a luxury, it is essential. The structural shifts occurring across the buy side and the sell side is introducing a compelling need for banks and brokerage firms to be able to keep up. In addition, the competition for share of wallet is necessitating banks and brokerage firms to be more targeted in how they deliver service to their clients. We have found that the best, most impactful solutions come from strategically partnering with our clients to extend our core offering with client- and partner-built modular components. With a centralized, access-controlled view of the client, it is now possible to bring the dream of advanced analytics, machine learning and artificial intelligence to life.
Second, systems must be interoperable and able to integrate with other applications. While the rules-based partitioning of access to data is paramount for a capital markets-grade client information hub, streamlining integrations are what unlocks the power of innovation. Interoperability allows software modules to be changed independently, individual components to share and exchange data consistently, and applications to interoperate with each other to create a unified sales desktop. We have also witnessed a growing phenomenon where our clients and partners, normally competitors, are in fact coming together as a community to share and exchange ideas. This is the ultimate interoperability.
Cost and risk reduction comprise the final facet in this trio of operational changes. An open system approach enables firms to reduce spend on technical debt while regularly providing staff with new competitive capabilities without expensive hardware and software upgrades. Open architectures allow the introduction of in-house developed upgrades and the ability to take advantage of innovative third-party software.
We believe vendors must be true partners to their clients and make it a priority to respond to the feedback and collaboration from its customers. Solutions must be purpose built for the specialized workflow needs of each desk. They must also be architected to constantly evolve not only the core features, but to extend the flexibility of the platform itself, in order to further empower clients and partners in their own innovation goals. This is how interoperability, innovation, and cost and risk reduction are successfully realized in the changing world of capital markets.