What Financial Institutions Will Be Like In 10 Years

By Martin Hartley, UK Managing Director of emagine, a management and technology consulting firm operating from 24 locations across the UK and Europe. 

It supports clients such as HSBC, the Royal Bank of Canada, the Bank of America, Credit Suisse, MUFG, and other tier one investment banks and financial services companies with business challenges by providing digital, tech, and business consulting services and solutions

It was in ancient times when banking and finance were first established; currencies were coins, jewels, and other valuables hidden in temples and heavily guarded buildings allowing people to accumulate wealth or trade commodities for power or favours. Fast forward to today and online banking has both strengthened the connection between countries’ economies and accelerated the speed at which global trade is now undertaken.

It is an evolution that is never likely to slow given the rapid advancements and enhancements in technology. The question is, can the finance sector keep pace with its tech bedfellow?

To summarise in a single word – automation.

The rise and conquer of automation

Automation is not a new concept by any stretch. eTrading has been automated since computers were first available. Markets for simple products like FX and equities are now completely automated, and the effort is increasingly focussed on algorithms to identify and execute trade opportunities and manage positions without publishing intentions to the wider market.

Fixed income markets are in the midst of automation, and any manual intervention in the trade flow will erode or even remove profit margins. So, the time and cost efficiency of automation which comes with a very small window for error will continue to be expanded across more and more finance functions until almost everything is automated.

But automation can only be effective with close collaboration between technology, trading businesses, and the highly specialised teams managing it. As such, the specialist tech workforce can’t afford to simply keep up with changing demands and processes – it needs to be one or two steps ahead of the curve.

Overseas investment

The result of rapidly developing tech has been the acceleration of globalisation. Today’s interconnected economies mean overseas investment is a highly attractive and viable business route than previously.

The result is that financial services’ middle and back-office functions are out-sourcing more functionality and requirements to organisations with technology teams overseas in countries such as India because they represent a cost reduction in doing business without any obvious way to differentiate to clients. However, banks see Front Office technology as vital, so aim to keep as much of this development in-house and onshore.

Nearshoring

As costs tighten the finance and tech sector should expect to see a rise in banks and financial services firms utilising nearshore services.

Nearshore outsourcing is the implementation of services in a neighbouring country. In the UK’s case, it would be a close-by European country that offers unrivalled English-speaking skills, speed and agility, cost-efficiency, and a culture and work ethic that feeds well into the high standards and expectations of our finance and banking sector.

It’s unparalleled when compared to staying onshore – imagine trying to skill up and secure and deploy a team of 35-40 in London within a month? Even with the best will in the world, it’d be a near-impossible task in the current employment market. Not to mention the eye-watering costs. emagine’s specialist nearshore teams have thousands of consultants working on client projects every day, with ramp-up time circa. 45 days, and ramp-down as little as 30 days.

But it isn’t just a matter of training up the teams, farming out the work, and sitting back to reap the benefits. Yes, it can be cost-effective, but it takes careful management and integration, and training and development, with strict protocols to ensure the levels of security and safety required for the finance sector.

These trends are becoming less nice to haves and more the norm. In the next 10 years, banking and financial services will continue to be shaped significantly by technological advances – and so the workforce too will be seeing a shift in operations and practices if it’s to keep up.