May 10, 2017
Until recently, the FinTech community globally has been deeply vested in conquering payments and lending businesses. In fact, payments and lending have steadily been the most funded and represented FinTech segments around the world. In the years ahead, however, the balance of attention and innovation adoption is expected to shift significantly with capital markets and investment banking seeing the increase of attention and development employing innovative technologies.
Technology serves as a key driver of value migration in the capital markets industry. While speed, informational advantage, efficient customer flow, and effective use of proprietary capital have always been essential aspects of a profitable market-making business, the way these elements are implemented is changing dramatically, BCG suggests in its report on capital markets published in May 2017.
Improvements in technology have enhanced the ability of firms of all sizes to directly access institutional markets, analyze large swaths of public trading data, and use analytics underpinned by predictive algorithms to create arbitrage opportunities, often involving little or no risk to capital. Technological change, in conjunction with regulation, has also accelerated the electronification of secondary-market trading, which is both forcing investment banks to adapt their business models and bringing new types of competitors into the mix.
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