It will take a combination of hot topics to change the financial services game in 2018, say Brickendon’s experts.
2017 may now be behind us, but the year of the Rooster’s hot topics of data, Brexit and regulation are not. According to Brickendon’s senior leadership team, the very same topics, with a sprinkling of digitalisation, Blockchain, cloud enablement and FinTech, will continue to be the key drivers in 2018.
“Data, access to it, and the ability to mine it, will be central to everything that happens in the future in financial services,” says Brickendon CEO Christopher Burke. “The simplification of processes and increased digitalisation are going to be big game changers, but only when combined with a more comprehensive view of data.”
Nathan Snyder, a Brickendon partner and data specialist agrees, saying: “We are now reaching a tipping point in data and analytics. For a long time, we have been talking about concepts such as big data and data science. These have been exciting and cutting-edge endeavours requiring the laying of a large amount of intellectual and technology groundwork.
“However, now the data is loaded and the toolsets are understood and available, I believe that 2018 will see data and analytics being used for operations and technology processes.”
According to Snyder, we now need to think about data analytics in terms of predicting what will happen and prescribing what should be done, rather than focusing on the past. This will allow us to move from managing process exceptions to optimising them. “It is the difference between fixing a broken part and assigning an engineer in advance to a part we know will break,” he says.
Better use and understanding of data will also help developments in the areas of robotics and machine learning, says Burke, adding that 2018 will be the start of the process to replace people with robotics and machine learning. “Many areas, including RegTech, data analytics and client servicing will be impacted, leading in the end, to the simplification of processes and increased digitalisation.”
Brickendon Partner and strategy expert Chris Beer agrees, saying that while many firms have already started to embrace the idea of digitalisation, there is still a long way to go and a lot to be achieved. “Business is becoming a lot more about the user experience,” says Beer. “Automated user interfaces can go a long way to helping this and embracing digitalisation is the key.”
Still, for many the past is here to stay. 2017’s political turmoil prompted by elections in Austria, France, and Germany, the Catalonian referendum and the shift in decades-old US government foreign policy, is expected to continue to shape the capital markets going forward, according to Brickendon Executive Director and regulatory data specialist Harpreet Singh.
“There is no doubt that Brexit will continue to take the limelight in many regulatory and non-regulatory discussions in 2018,” he says, adding that many of the details of the UK’s departure from the EU will only become clear as 2018 progresses and banks will have to adapt accordingly.
“2017 was the year when many banks laid down their strategy, but they will have to keep a close eye on it if they are to survive and thrive in 2018,” says Singh.
In addition to Brexit, regulations such as the second Markets in Financial Instruments Directive (MiFID II), the requirements for central clearing and the second Payments Services Directive (PSD2) will force significant changes to the banking environment, with the innovators and disrupters emerging as the winners. “Many larger banks will be forced to rethink their business models,” says Singh.
Beer agrees. “Success in the future will depend on how firms use their compliance with regulations such as MiFID II to their strategic advantage,” he says. “The markets themselves will change in line with new regulation such as MiFID and those firms that are able to take what they are doing and apply it to other legislation will have an advantage.”
Smaller FinTech companies will also have a part to play in the 2018 financial services market, with many increasingly starting to provide services that were previously done in-house, says Beer. “Banks will have to make a decision about whether they service customers through their own architecture or through a third party. Sitting back and doing nothing is no longer an option.”
Blockchain is also something to watch, according to Singh. News last year that several banks, including Goldman Sachs and JP Morgan Chase, completed a successful six-month trial using the technology in the equity swaps market, means that use of the
distributed ledger technology is no longer just hypothetical. The opportunities for financial services are significant.
In short, we aren’t expecting the year of the dog to bring any major shocks. It will take something bigger than the rise of the robots to completely knock data, Brexit and financial regulation out of the game-changing rankings. Still, together, all these issues have
the potential to change the game, but who emerges as the winner this time next year remains to be seen….
“2018 will be all about the simplification of processes and digitalisation, as well the acceleration of the process to replace people with robotics and machine learning.” Christopher Burke, CEO
“We are now reaching a tipping point for data analytics. I believe 2018 will see a switch to predictive analytics that will enable us to move from managing process exceptions to optimising them. It’s the difference between fixing a broken part and assigning an engineer in advance to a part we know will break. If done correctly, the impact will without doubt be a leap in productivity and efficiency.” Nathan Snyder, Partner
“There is still a lot of regulation to follow whether it’s MiFID II, SFTR (Securities Financing Transactions Regulation) or FRTB (Fundamental review of the Trading Book) and those that embrace regulatory change and use it to their strategic advantage will be the ones that succeed. The key is to see the regulatory deadlines as the start of the regime and not the end.” Chris Beer, Partner
“2018 could be a turning point for financial regulation, with developments being primarily shaped by political events. The five main trends that we expect to see impacting capital markets in 2018 are Brexit, data regulations, FinTech, the overall macrostructure and cyber security.” Harpreet Singh, Executive Director