Market Transformation: Part 2

We are currently living in a period with unprecedented change. That change coming from all directions unexceptionally. In financial services, that change is resulting in some unexpected threats as well as some surprising opportunity. The most tangible change that we can oversee is the digital expansion. Digital is becoming pervasive across industries. The importance of digitalization and were the first to apply it in their day-to-day operations to improve efficiency, reduce costs and pass on the benefits to their customers.         Disruption started when non-financial services companies entering the financial services field. Earning massive profit and taking over conventional financial services. These non-financial services such as Alibaba with AliPay, Amazon with Amazon Pay, even in Indonesia Go-Jek with Go-Pay, they keep rectifying and improving their features. Adding discount, sales, collaborating with various brands and stores, simplifying their service, and many more.         Moving on, the degree of digitalization in capital markets industry lags behind other financial services while the overall sector trails consumer goods/retail business.  Because the capital markets industry is somewhat shielded by large balance sheet requirements, regulation and network effects, firms are unlikely to experience the kind of big-bang disruption caused by companies like Uber and Netflix in other industries. However, the challenges in front of the digital leaders are manifold as they embark on the change journey.         Among the stakeholders in capital markets firms, there is higher investment appetite for Digital Securities. This is followed by AI, technology transformation, and blockchain. Asset digitalization (aka tokenization) is creating a whole new user experience. Digitizing an asset and using a smart contract enables the shares’ owners, for example, to sell shares of private securities on complaint exchanges on-demand — and not suffer from their money being locked up in funds for years. Investment banks have also been significant players in this digital ‘disruption’ through the advancement of client portals, electronic trading venues, and connectivity standards such as FIX. However, investment banks have been uneven in their overall response to potential disruptions by these digital technologies. This whole process holistically will take time but will change the industry beyond recognition. Nonetheless in this everchanging era, the tipping point is that the consumer will continue to benefit from better, cheaper, more innovative, services and offerings in the financial services space.

Sources:

Deloitte

PwC

Forbes

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