How Digitalization is Transforming Capital Markets
Global capital markets have been increasingly adopting digital technology in the way they execute business and operating strategies. Digitalization indeed has greatly shaped how capital markets are today and will continue to do so in the future. Apparently, the main driver of this development is the need to face significant challenges in the industry, which include increased competition, market volatility, compliance issues, and outdated IT systems, among many others, but more importantly to ensure sustainable growth amidst these difficulties.
Cloud technology, artificial intelligence, blockchain technology, and the Internet of Things are just a few of the latest technologies being integrated into capital market systems.
Seen as the most disruptive technology by many, cloud computing offers time series databases and parallel streaming, advancements that offer companies a comprehensive, reliable, and cost-effective view of activity. In 2018, Infosys conducted a survey among capital markets firms and established that around 70% of them are planning to adopt new cloud services or replace their current legacy systems with cloud computing. Projected to grow at 17.9% compound annual growth rate (CAGR) last year, the global cloud computing market reached $1,240 billion against an estimated $545.8 billion.
Blockchain technology and electronic trading platforms pave the way for speedier, more accurate, and more efficient financial transactions in capital markets, making it easier for investors to trade securities and manage risks. New asset classes, such as cryptocurrencies and digital tokens, were also made possible by blockchain technology. These assets are changing the nature of capital markets by offering investors novel ways to invest and trade.
Digitalization has democratized access to capital by enabling smaller companies and individual investors to participate in capital markets. In raising funds, start-ups and other companies are able to bypass traditional mediators and go directly to investors through crowdfunding and peer-to-peer lending platforms.
Through artificial intelligence, sound financial decision-making and better regulatory frameworks compliance can be done, as AI tools enable the recognition of insightful data and the automation of document processes for regulatory notices and more. Thomson Reuters, in its latest research, said that 49% of their survey respondents are looking to RegTech solutions to manage compliance, which if properly and strategically implemented will allow companies to allocate their time and resources to where they should be.
Further, the Internet of Things has its applications in capital markets through providing heightened security, interoperability, and privacy, along with generating research and trading strategies, etc. The global IoT market is expected to go up at a CAGR of 26.4% in a seven-year period from $478.36 billion in 2022 to $2,465.26 billion in 2029, promising a wider range of advantages for the capital market ecosystems.
Because of digitalization, capital markets are being transformed in many key ways. Aside from the benefits mentioned above, improved intelligent automation adoption can also help in leveraging human workforce, machine usage, and expand talent bases.
Ultimately, technology will empower capital market firms as they adapt to ever-changing financial environments and customer needs down the road.
At the upcoming Annual Investment Meeting, wide-ranging discussions on digital transformation across different sectors, including capital markets, will be presented. Take advantage of this perfect opportunity to gain valuable insights into the local and international capital markets, especially now that the pandemic is at a “transition point.”
