Over the last decade, several trends in the global financial services industry have spurred firms to work together with FinTech providers in order to modernise their operations and optimise their front-, middle-, and back-office functions. The pandemic has been a catalyst for this mutualisation and shone a new light on the benefits it can bring, especially for critical functions, such as post-trade processing.
Each year banks spend in total between $6 billion and $9 billion processing trades in highly standardised asset classes. However, research found that mutualising these functions could reduce expenses for the industry by between $2 billion and $4 billion annually. A report by Broadridge this year also highlighted that the financial benefits of next-gen technologies are on track to rise further: 67% of respondents expect to see decreased costs and 62% expect to see improved profitability over the next two years through their adoption.
However, it is important that increased investment in technology is coupled with a strategy for accessing the best talent. Companies need to hire people with a deep domain knowledge of industry processes, and a solid understanding of how next-gen technologies work. Yet these types of people are going to become even harder to find next year as the competitive race for talent continues. As a result, we expect to see more custodians turning to third-party FinTech providers to access their pools of skilled, experienced personnel as much as they are for the technology itself.
– Samir Pandiri, president of Broadridge International
We will see an acceleration of desktop consolidation across asset classes, to achieve more efficiencies and oversight. This has become a much more urgent need with the potential long term continuation of remote working. Users will also demand greater access to liquidity and execution quality, aggregated liquidity and enhanced pre- and post trade analytics. Cloud migration will be a major focus for scalability and ease of deployment purposes. The pandemic has taught the industry the importance of being able to work remotely with the right systems. As managers chase alpha, more firms will look to create quantitative trading strategies thereby increasing the need for APIs.
These will need to be smarter than prior and will need to be able to manage complex algos, pairs and gamma trading strategies. There will be a big shift in the way institutions will see crypto in 2022. The asset class will start to form part of traditional asset managers mandates and allocations to crypto assets within their funds will increase. This could potentially create operation headaches that their systems will need to overcome. Electronification of fixed income markets will continue throughout 2022 with more accurate price discovery tools and a wider range of liquidity providers distributing axes and inventory in multiple formats. Outsourcing of trading and other services will accelerate as we move to a new workplace paradigm. Recruitment challenges under the pandemic will increase the need for outsourced trading services, as will the longer-term need for remote working.
– Chris Jenkins, managing director at TORA
As the events of the past 18 months have shown, the need for enterprises to have flexible technologies able to handle changes in working environments has accelerated. Employees the world over found themselves displaced from their physical office spaces and thrust into a completely digital workplace, making the shortcomings and damaging repercussions of traditional operating systems and legacy technologies acutely apparent.
What’s more, employee satisfaction today is very much anchored in being provided with the right apps and technology tools within daily workflows. In 2022 expect to see a “new normal” evolve – which will see a move away from cluttered desktops, disjointed communication and disordered workflows across enterprises. Instead, the focus will be on having access to a set of tools designed to empower productivity and deliver exceptional employee experiences. Business leaders recognise that the future of work is changing. We are excited to be part of defining the path, accelerating employees towards a hyper-personalised experience.
– Adam Toms, European CEO, OpenFin
Next year will see attitudes toward front-office innovation change as it becomes increasingly clear that technology is not a cost centre but a revenue generator. Firms need to take control of their technology to differentiate and compete in the long-term. This shift in approach will drive two key themes.
The first is the increased focus on technological intensity, where institutions reduce their reliance on vendors to build their own technology to enable them to differentiate and compete. This changing approach to trading technology will drive institutions to move away from ‘off-the-peg’ technology, which is no longer enough to differentiate as they transition to taking front-office innovation into their own hands.
The second is the front office’s shift to the cloud. While the back and middle-office’s migration to the cloud is well established, the front-office has been slower to make the leap. Attitudes are changing however, and businesses are realising that the cloud is secure, powerful and gives firms easy access to rich data and analytics. We can expect to see front office infrastructure increasingly moving to the cloud, as it becomes the centre of a new financial ecosystem that will become increasingly integral to institutions’ operations.
– Matt Barrett, CEO of Adaptive Financial Consulting
Over the past couple of years, initiatives such as FDC3 have made great strides to solve the challenges associated with delivering actionable intelligence and workflow focus to the desktops of trading teams. These open standards reduce the friction of data movement and application interoperability to increase speed, quality and efficiency of trading-decision making.
With proven solutions to plumb data increasingly commonplace, the next 12 months will inevitably see software vendor focus free up from solving aggregation and connectivity issues to delivering value-adding innovation. Consequently, previously tied up resources will be allocated to developing and providing cutting-edge new technology that dramatically pushes workflows forward. In 2022, those who move ahead of the pack and differentiate will be the firms working closely with clients to understand their current needs and future requirements. As a result, they will optimise their thinking and technology around the user and experience rather than grappling with customising legacy workflows. Augmenting traders with automation and alerting, driven by actionable intelligence, represents the next generation of front-office technology.
– Andy Mahoney, managing director, FlexTrade EMEA