Top Trends Shaping the World of Investment Banking Today

Transformation of Investment banking

Several industries have been drastically affected in 2020, finance was no different. According to PwC, deal-making during this year was split into two parts: the deal count was down to 15.5 percent in the previous year and catered at USD 971 billion. While in the second year the deal-making activity was at USD 2.2 trillion. We know from the 2008-2009 financial crisis that a downturn does not mean the failure or death of deal-making. In fact, according to Harvard Business Review, organizations that make vital acquisitions during an economic downturn outperform those that did not.

Success factors for investment banking

One of the biggest keys to their success is the support and executive vision that leads to binding between technology and business teams. As we continue to progress amidst the existing economic problems, it is clear that organizations with these key features tend to win more often:

  • Those with strong technology stacks are flexible enough to take advantage of a market rebound quickly
  • Delivering value to clients will help companies outperform even in a downturn
  • The best investment banks leverage the power of relationship capital to drive deals

Top trends shaping investment banking today

Over the last decade, more than 10,000 banks have been using applications to manage their pitches, deals, and relationships. Most of the high-performing teams in the world operate this way as technology creates a competitive edge that sets them apart from their competition.

Here are the top four trends shaping investment banking today:

Digital technologies

The pandemic has dominated investment banking companies for a strong wave of digital transformation i.e. automation and consolidation of mid-and-back offices. The latest digital technologies that are introduced and redefined are:

  • Cyber hygiene
  • Confidential computing to streamline communication and data privacy
  • E-payments
  • Use of artificial intelligence and machine learning to improve existing systems
  • Blockchain technology
  • Robotic Process Automation (RPA): saves operational cost

Virtual IPOs

Organizations have opted for virtual Initial Public Offerings (IPO), one of the most prominent investment banking industry trends. Traditionally, the pricing and roadshow of IPOs would take approximately 14 days. It also used to rely on prospective investors and face-to-face interactions among management. Automation of this process has reduced the time by 50 percent. Also, demand for remote transactions and connections has accelerated in 2020-2021. Tracking reports and legal diligence is the new trend for IPOs.

High-frequency trading (HFT)

The high-frequency trading market is set to nail a bullish growth globally from 2021-2026. These platforms analyze the market, use complex algorithms, and keep pace with emerging trends in a second’s divide. Typically, HFT is employed by large banks in the investment banking field and expects favorable returns on trades. This provides a systematic approach to active trading.

Big data

The investment banking industry faces pressures on cost as well as from economic fluctuations. These banks often have shortcomings such as a lack of robust strategy, inability to manage huge volumes of customer data, and no long-term relationships with customers. Investment banking these days is leveraging big data analytics to combat this uphill battle and get profound insights into customer data, reduce churn rates and improve customer satisfaction. According to survey results by PwC, over 80 percent of banks are using big data tools and have witnessed improvement in productivity as a result. Some of the commonly used big data tools are:

  • Cloudera
  • Hortonworks
  • MongoDB
  • MarkLogic
  • Datameer
  • Teradata