FSPERSPECTIVES

FSPERSPECTIVES

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Content

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Investing where “IT” matters most

Preparing Now for the future

Pause. Strategise. Invest

Mapping the course for future state

Breathing life into investment banking

How Accenture can help

Delivering innovation from the cloud

Where regulation meets tech

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Investment banks across India and the ASEAN region have prioritised investment in immediate technology requirements over their longer-term goals. But to sustain the gains, they’ll need to leverage cloud-based platforms, collaborate with next-generation regulatory technologies (RegTechs) and enhance existing systems.

In Part II of this white paper, we identify critical investment areas to help investment banks on their journey towards digital transformation.

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INVESTING WHERE “IT” MATTERS MOST

Preparing Now for the future

The global investment banking landscape is in the throes of a significant digital transformation. Part I of this whitepaper, Charting the Digital Journey for Investment Banking, provided a comprehensive analysis of how investment banks in India and the ASEAN region can mitigate the impact of compressive disruption. It delved into the rise of FinTechs, the areas investment banks should consider competing with them and those where strategic collaborations would be the best bet. The whitepaper also talked about how investment banks can leverage the latest disruptive technologies and the strategic areas they should invest in. Finally, it studied the impact of new revenue-generating avenues and technologies on the overall investment banking business model. A key observation was that investment banks in India and the ASEAN region need a strategic roadmap towards adopting digitalisation.

Part II of this whitepaper defines both the intermediate and long-term goals that investment banks must consider while preparing for digital transformation. It also explores the many opportunities for investment banks in building robust systems, integrated and secured infrastructures, new markets and new products that can drive down costs.

It has become clear to most investment banks in India and the ASEAN region that they need to invest in disruptive technologies. Our in-house observation1 has shown that investment banks have so far prioritised short-term goals over intermediate and long-term goals, and let immediate requirements guide their technology investments.

1. The internal observation is based on interviews with Accenture program leads responsible for large transformational programmes with 6 of the top 10 global investment banks that are Accenture clients. The insights were combined with secondary research on the Indian and ASEAN markets.

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Our in-house observation, based on 6 of the top 10 global investment banks that have a presence in India and the ASEAN region, and have partnered with Accenture for their IT transformation, showed interesting results. The heat map of the internal observations is as follows:

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CLIENT ONBOARDING/ANTI-MONEY LAUNDERING (AML)

SALES TRADING

TRADE CAPTURE

AFFIRMATION CLEARING AND SETTLEMENT CUSTODY SERVICES

Use of robotic process automation (RPA) in AML and onboarding

Reduces the team size

Reduces the time required for processing client onboarding, know your customer (KYC) and AML

Use of AI and predictive analysis

Decreases sales efforts

Provides quick access to relevant information on front-line sales

Increases the client base

Use of AI and predictive analysis

Reduces administration time

Upgrading legacy applications

Allows for straight through processing (STP) from trading platforms

Captures trade accurately at the first instance

Allows for zero exceptions

Use of RPA for affirmation and matching

Creates a quick and correct affirmation process

Decreases the affirmation time

Upgrading legacy applications using new technology like blockchain

Creates multi-asset platforms

Allows for integration with external applications via standard messages

Upgrading legacy applications using new technologies such as blockchain and RegTech collaborations

Addresses large (maximum) clearing volumes

Ensures regulatory compliance

Upgrading legacy applications using new technologies such as blockchain, self- service portals and multi-channel access

Connects with Internet- and mobile-based applications

Allows self-servicing

Reduces processing time

FRONT OFFICE

MID OFFICE - OPERATIONS

Figure 1: Investment banking technology value chain heat map

HIGH FOCUS MEDIUM FOCUS LOW FOCUS

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REPORTING

TRADE RISK MANAGEMENT

REGULATORY COMPLIANCE

PROFIT AND LOSS

COLLATERAL VALUATION

MARGIN CALL GENERATION

Upgrading legacy applications using new technologies such as blockchain, AI and machine learning

Provides real-time collateral valuation

Enables configurable parameters for defining eligible collateral

Supports multi-asset classes as collateral

Upgrading legacy applications

Generates real-time margin calls

Standardises messaging support

Upgrading legacy applications with RegTech collaboration

Consolidates reporting

Ensures a trade repository and reporting compliance

Provides customised reports

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MID OFFICE, BACK OFFICE – RISK COMPLIANCE

BACK OFFICE - COLLATERAL MANAGEMENT, REPORTING

Upgrading legacy applications using cloud-based architecture

Supports real-time risk calculation

Enables configurable risk parameters

Upgrading legacy applications with RegTech collaboration

Enables regulatory compliance

Upgrading legacy applications using new technologies such as blockchain, AI and machine learning

Makes available real-time profit and loss reports

Makes for zero reconciliations (with blockchain technology)

HIGH FOCUS MEDIUM FOCUS LOW FOCUS

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Today, investment banks are operating in a difficult environment, with weak revenues and new competitors providing cost-effective and intermediate solutions. There is a growing need to perform a balancing act between upgrading or maintaining legacy applications and focusing on cost reduction.

Our in-house observation shows that investment banks are focusing on customer-centric technologies, that is, investment in enhancing customer experience, robo advisors, chatbots, predictive analytics and deep machine learning, to anticipate client needs better. They are also investing in systems that can bring down costs. For example, they are looking at RPA to reduce manual efforts, AI to improve efficiency, open application program interfaces (APIs) and cloud platforms to lower infrastructure costs. Keeping up with regulatory developments is yet another focus area to ensure that the systems are compliant with market regulations such as BASEL III, the Volcker Rule of the Dodd-Frank Act, data protection regulation, the Markets in Financial Instruments Directive II (MiFID II), Central Securities Depositories Regulation (CSDR) and Payment Services Directive. Finally, investment banks are also investing in ensuring cyber security with the help of new and emerging technologies or improvising existing applications and training workforce on using New IT solutions.

PAUSE. STRATEGISE. INVEST

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• Prioritise digital investments based on the “high focus” areas identified in the heat map (see Figure 1) to create new solutions, enhance existing systems to combat competition and meet client expectations.

• Move towards strategic partnerships with FinTechs and utility-driven business models by leveraging the capabilities of FinTechs. Provide value-added services in terms of access via multiple channels.

• Partner with consulting and technology players with experience in emerging technologies, such as distributed ledger technology, machine learning, AI and AI-based big data analytics, to co-innovate new services and products.

• Provide customers with enhanced digital experiences such as interactive dashboards, virtual reality assistants and chatbots.

• Replace redundant processes of legacy systems with new processes. For example, automating small trades to cut costs to free up dealers for bigger transactions.2 Similarly, RPA in client onboarding is replacing existing manual processes,3 and automated systems that scan mails sent by clients and process clients’ post-trade allocation requests have eliminated manual intervention, freeing resource time for other critical activities.4 Manual processes in customer authentication, advisory and underwriting services are also increasingly being automated.5

• Consolidate web portals and reporting processes.

• Prioritise investment in training the workforce on new technology, methodologies and innovative solutions. This will equip them to handle digital disruptions.

• Focus on outsourcing less critical services in the value chain and tackling the threat of new entrants.

• Play an active role in designing and supporting relevant regulations across Indian and ASEAN investment banking markets, with a focus on opportunities for alternate lending in rural parts for small and medium enterprises (SMEs).

Still, there is a need to prioritise based on quick wins that increase the return on investments and fast-moving solutions where time-to-market is low. To do this, investment banks need to strengthen their IT value proposition towards client-driven investments.

Here’s how investment banks can achieve that:

2. https://www.ft.com/content/6d15c274-70ec-11e7-aca6-c6bd07df1a3c3. https://www.kofax.com/Learn/Case%20Studies/2015/BNP%20Paribas%20Experiences%20Faster%20Trade%20

Confirmation%20Cycles%20and%20Reduced%20Operational%20Risk4. https://www.ft.com/content/da7e3ec2-6246-11e7-8814-0ac7eb84e5f1 5. https://gomedici.com/how-most-powerful-financial-institutions-apac-region-applying-ai/

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Investment banks need to develop a future state and roadmap, especially in tough and competitive ecosystems. They must also take into consideration both functional and technical landscapes, and aspects such as cost, business and vendor. Accenture’s proven IT strategy methodology and advanced frameworks could help investment banks assess all these dimensions (see Figure 2).

Figure 2: Accenture IT strategy methodology

MAPPING THE COURSE FOR FUTURE STATE

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The rules of the game have changed for the investment banking sector in India and the ASEAN region, and to win, investment banks must make a wise pivot to the New. As a first step, they must embrace agile thinking. Some players are already doing this by:

• Moving from underinvesting in technology and maintaining a strong traditional banking system to investing in transforming their digital businesses, to compete with the new service providers

• Increasingly viewing FinTechs as partners for providing new business services to retain their client base

• Effectively leveraging the data available to them

• Investing to equip their workforce with new technology, increase their cross-selling skills and automating some of the mundane manual tasks

• Exploring open platforms for cloud and open APIs for infrastructure

Investment banks must also tackle both long-term and intermediate goals while making tactical short-term wins. In short, if they want to remain relevant, and regain market share and the dynamic pricing power, innovation must remain at the centre of everything they do.

BREATHING LIFE INTO INVESTMENT BANKING

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With wide experience in implementing integrated consulting solutions in top investment banks globally, Accenture has the capability to deliver technology benefits across the entire value chain of the investment banking operations. Investment banks can capitalise on our rich domain experience to implement a future-state robust ecosystem.

Using best practices followed by global investment banks, we can help you implement new and innovative technologies such as blockchain, advanced analytics, cognitive RPA, mobile applications and omni-channels, cloud, and interactive technologies. We also have experience in identifying processes that can be automated, and implementing RPA and AI to streamline complex and manual processes. Focusing on “innovation at scale” has the potential to enable clients to overcome bottlenecks with both innovative approaches and solutions.

HOW ACCENTURE CAN HELP

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Accenture believes that “innovation,” “differentiation” and a “client-first” attitude provide a competitive advantage to investment banks for building a future-ready application (see Figure 3).

Delivering innovation from the cloud

Figure 3: New IT services offered by Accenture

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Accenture’s cloud transformation projects have benefitted large investment banks by bringing technology and industry together to develop cost-efficient solutions through:

• Designing a public cloud platform for a brokerage application

• Designing a public cloud wealth management platform

• Developing IaaS, PaaS and SaaS packages for investment banks in the risk management domain

• Developing solutions for cloud security, including secured architecture, encryption, regulatory compliance and authentication

Our collaboration with various RegTechs can be leveraged to identify and design custom IT architecture and develop future-state technology with integrated solutions.

Where regulation meets tech

Accenture client

Large US financial services provider

Large Swiss investment bank

Large US investments division of an insurance company Large US financial services provider

Leading Nordic financial institution

Large US financial services provider

Large US financial services provider

Developed a regulatory reporting application

Developed a credit risk reporting platform

Developed a global investment management system to calculate credit risk exposure, risk and pricing across geographies

Developed a derivatives risk management system

Helped meet financial regulatory compliance

Developed a KYC application

Developed a risk and regulatory testing service

Services provided

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• Block chain solutions: KrypC, Algorithmix

• AI solution, Chatbot: Fluid AI, Yellow Messenger

• Information intelligence platform: CrediWatch

• Aggregation and analysis of financial data: Perfios

• Digital contracts: Signzy

• Regulatory reporting: Global IDs

• CustomerXPs Solution: Clari5

Collaborations with next-generation RegTechs

The traditional investment banking sector needs to evolve and chart a new growth path for itself. While short-term wins are important, investment banks must have a clear roadmap of the long-term goals to rotate to the New. Developing customer-centric solutions must be at heart of their growth strategy along with reducing costs, improving efficiencies and keeping up with regulatory developments. For this, leveraging new technologies, partnering with FinTechs and automating processes, will be critical. If they ace this, they’ll not only be able to take advantage of disruption but become disrupters in their own right, building a future-ready ecosystem.

Authors

About Accenture

RALF BEMMANN Director—Capital Markets ASEAN Accenture Technology Consulting ralf.bemmann@accenture.com

BHUVANA KARTHIK

Asset Servicing Practice Lead—Capital Markets Industry Accenture in India bhuvana.a.karthik@accenture.com

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 449,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

Disclaimer: The contents of this material are for informational purposes only. Unless otherwise specified herein, the views/ findings expressed herein are Accenture’s own.

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