Many trends are emerging in the global capital markets industry. In this constantly changing market, success means keeping track of industry trends and other megatrends, including customer perceptions.
In this article, we focus on the current state of the capital markets and what could be some drifts in 2022. Start uncovering essential patterns and outlooks.
1. Reviving ESG
Active ESG investing will be a prominent tendency in the coming years. To create a meaningful impact, investors and shareholders need to continue considering environmental, social, and governance (ESG) factors. According to Morningstar, US sustainable funds amounted to $16 billion as of the third quarter of 2021.
2. Smart contracts
According to Nasdaq, International Capital Market Association (ICMA) measures the overall global bond market to be $128.3tn. Tokenization could help the bond market to function more efficiently. Developed by Nick Szabo, smart contracts continue to be secure, quick, and transparent.
Further, decentralized finance (Defi) and smart contracts are reshaping and molding capital markets in numerous ways. As of today, assets locked into these smart contract platforms are growing and are soon to explode in 2022.
The winner-takes-all-dynamics has been fundamental to platform business models. In banking and capital markets, big tech giants are actively expanding into various verticals of the financial ecosystem. Some examples include wealth, insurance, unsecured lending & credit, and mortgages & secured lending. Thus, bank as a platform is emerging into colors shortly.
Intelligent automation like AI, machine learning, and RPA (robotic process automation) promises increased operational efficiency for capital markets. Moreover, it has improved the entire trade life cycle or value chain. It simplifies information extraction, insight generation, case investigation, and risk assessment.
Also, legacy technology and siloed solutions have hindered progress for middle and back-office functions in capital markets. From rule-based workflow automation to simple digitization, every pursuit has resulted in tremendous value. Finally, capital markets are focusing on raising the return on equity (ROE) and are staying away from regulatory remedies or at least withering the reforms storm well.
5. Cloud Adoption
Reduced infrastructure costs, improved innovation, and less competition are effects of cloud adoption in capital markets. It also offers superior customer or user experience and quicker and economic decision-making. However, only 5-10% of firms in this industry have prioritized cloud-first strategy in recent years. And those who did enjoy less turbulence, instant access to top-notch technology, and enhanced accessibility.
Thus, the market or industry is ripe for a multi-cloud or hybrid cloud strategy. It eventually reduces carbon footprint, and cloud migration is the best choice any organization could make to achieve the best results, agility, and superior performance.
6. Data-driven compliance
According to Deloitte, confirming financial resilience has been pivotal within the capital market industry. Migrating to digital business models and assets have also been in the vicinity.
Finally, the current and near regulatory outlook mandates zero regulatory breaks or breaches.