The COVID-19 pandemic will be a catalyst for future technology and operations change, according to 90 percent of respondents to a survey conducted by the Association for Financial Markets in Europe (AFME) and PwC.
The Technology and Innovation in Europe’s Capital Markets report surveyed the largest investment banks in Europe to assess their technological progress over the past two years.
The report found that the pandemic has accelerated the journey of investment banks’ technology transformation.
However, it was highlighted that consistency in regulation and further investment are needed to ensure banks in Europe can fully deploy competitive technology.
Findings identified that banks have accelerated adoption of emerging technologies and new ways of working but insufficient IT investment, complex legacy systems and increasing regulatory requirements, remain some of the key barriers for further progress.
It also showed that 50 percent of respondents believe that investment allocated to technology transformation is sufficient, up from 28 percent in 2018.
Meanwhile, 63 percent of investment banks are now implementing cloud computing, up from 33 percent in 2018.
Notably, only 17 percent of respondents believe the benefits of new technologies are being realised across their organisation.
More than half, 61 percent, of investment banks see operational resilience as one of the top priorities for their technology transformation.
James Kemp, AFME’s managing director, commented: “Capital markets demonstrated significant resilience through the COVID-19 pandemic, adjusting to extensive remote working and high market volatility without major disruption.”
Kemp explained that innovation is crucial for banks to continue serving their clients, though it’s clear that the emerging regulatory framework also needs to adapt to support, not limit, innovation at this critical period of change.
“New regulatory initiatives need to remain technology-agnostic, risk and principles based, globally consistent, and follow the principle of ‘same activity, same risk, same regulation’. This will allow the industry to continue harnessing the benefits of new technologies whilst minimising risks.”
Mark Leaver, partner at PwC, added: “The industry needs to step up its commitment to automation, technology simplification and leveraging the opportunities of new technology. Culture change, collaboration and building new ecosystems will be critical to meet the pace of adoption required. Regulators will play a part here as a new framework emerges that will help shape the industry over the coming years.”
The report predicted a shift to a longer-term transformation strategy across the investment banking industry.
AFME and PwC have identified five calls to action which the industry should adopt in the next two-three years.
This includes prioritising investment in a long-term and clear change agenda, accelerating the convergence of business and IT capabilities for increased agility, and creating an incentive structure for investment banks and third parties to collaborate.
It also includes building an organisational culture for innovation as well as ensuring collaboration for a new regulatory framework.
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