Role of Emerging Technologies in Investment Banking
Published on November 9, 2022
Why investment banking areas fall behind in terms of technology up-gradation remains a hot topic of discussion to date. Not less than two years ago, worldwide technology M&A built over $630 billion, demystifying the fact that technology doesn’t knock the doors of investment banking. We can only derive that technology works as a catalyst other than a disruptor in this domain.
We have laid a few ways in which investment banking is harnessing technology to step up their games these days:
Digital Transformation
In the race to keep up with changing times and actively beat future disruptions, the banking sector requires slight adjustments in the front-end and back-end operations. Digital transformation has become more than a norm; it is a necessity now. Implementing state-of-the-art technologies like IoT, cloud computing, and blockchain guarantees a successful digital change.
Today, interest rates have reached close to 0%, drastically reducing banking fees. However, with expanding customer concerns, this sector needs to leverage data to automate business processes and reduce expenses. The digital transformation allows the banks to modernize their tools and applications with mentioned technologies and build an omnichannel product, services, and workflow.
Artificial Intelligence or AI
The core existence of AI is a threat to investment banking as AI goes with a philosophy to train machines to perform human tasks. As AI advances further, it increases the chances of human efforts with machine processes. In deal management, it means all the operations like company listing, due diligence, deal initiation, and more could be performed by AI. AI is used in the investment banking area to conduct research at various levels like marketing and due diligence. AI can generate reports at large in real-time and spend less time in filing and documentation.
Direct Listing Technology
Preparing for the initial IPO or initial public offerings can be a handful of tasks requiring extensive time and effort. Lately, leading companies across the globe have been using direct listings, cutting down bankers from the process. In a swift change in trends, financial bodies are seeking a more accessible alternative to traditional IPOs. Additionally, direct listings are becoming more accessible, with the existing barriers fading with time. Hopefully, it will give rise to a host of platforms that can allow businesses to go through a seamless direct listing process. This increases the chance of the invention of technology solutions meant for a direct listing and aims at saving enterprises millions.
Natural Language Programming or NLP
NLP harnesses AI components to analyze human and computer interactions. NLP is credited with the conversion of unstructured data into structured and understandable ones. Just like an investment analyst who can transform unstructured data into measurable one. NLP can be used largely in investment banking, from sending out annual reports to making investor calls and assessing bank statements. In the same line, the diligence team was historically bombarded with endless data by the selling team, slowing down their efficiency. With NPL, this pressure can be eliminated with faster information processing.
Virtual Data Rooms or VDR
As already mentioned, investment banking deals with data and information flooding every minute. Therefore, it requires a higher storage capacity to avoid misplacement of an important information. In dealing events, participants often need to share relevant data to attract others’ attention and tell them about their operations. This is required in order to make the deal process more productive, ensuring a greater ROI. The VDR allows deal makers to harbor more productivity, better compliance and regulation, less cost expenditure, and data security. VDR is an excellent piece of technology to move forward in the dealmaking process.
Blockchain
Although invented over three decades ago, blockchain has entered the investment banking arena in the past half-decade. It has great potential in the financial world, adding more value to the processes involved. In investment banking, reconciliation processes and systems come at a hefty price, and regulatory reporting takes immense effort with lumpsum data, which has to be mutualized. An independent study by a leading professional services firm suggests the following effects on investment banking if empowered with blockchain technology:
1. Reduced expenditure in central finance reporting
2. Centralized operations can get more efficient and budget-friendly
3. Cost savings can be done in the compliance process
4. Overall, business operations can get cheaper
Mobile apps
Smartphones have entered every industry and stream; investment banking is no different. Owing to popularity and handiness, most investment banking companies offer their customers’ services through smartphones. All the credit goes to flutter app development, which has shortened cross-platform app production. Such services aim at connecting customers with their representatives directly with client personal dashboards or impart market trends and data, interactive analysis, and industry reports in real-time.
With more and more application programming interfaces emerging in the landscape, more possibilities have opened in investment banking apps. This setup benefits both parties, where fintech startups can nourish better under an industry-recognized financial body, and these seasoned industry players hop on the latest technological advancements.
Bottom Line
The technologies mentioned above have a high potential to carry the investment banking sector on their shoulder and walk towards the path of success. They empower investment banking processes by allowing investment bankers to be more efficient than their natural selves. And there is no denying that the industry filled with intelligent individuals, who can create value based on the best data available, can not work around emerging technologies!
The outlined technologies teamed with the investment banking area are a miracle to wait for; while there will be issues relating to data security and more, there will always be some constructive solutions!