CAPITAL

MARKETS
TECHNOLOGY
2022

Five Technology Design

Principles for Digital
Capital Markets
THE SPEED-READ
The information revolution is impacting every business, but
capital markets firms are really feeling the effects. The industry
is facing a perfect storm of negative publicity, ongoing fee
compression, value chain rebalancing, continued automation
and disintermediation, and increasingly challenging talent
acquisition—just to name a few of the forces at work. Add to that
an unyielding current of new regulations, and the picture is bleak—
especially for those that don’t engage in wholesale redesign.

To offset these negative fundamental By creating agile organizations or

trends, leading capital markets firms “living businesses,”—companies
should adopt five organizational design designed to achieve and maintain
principles: intelligent and automated, perpetual customer relevance—firms
data-led and client-centric, open could transform themselves. Doing so,
and accessible, agile and resilient, Accenture believes that investment
and simple and homogeneous. banks, for example, have the potential
to not only increase return on equity
(RoE) by up to an estimated three
to four percent, but they could also
drive cost-income (CI) ratios back to
lower and more acceptable levels.

2 CAPITAL MARKETS TECHNOLOGY 2022

THREE ELEMENTS
OF COMPRESSIVE
DISRUPTION
Shielded by large balance sheet In the capital markets industry, compressive
requirements, regulation and network disruption is evident in three key symptoms:
effects, global capital markets players stagnation in the overall revenue pool,
are unlikely to experience the kind increased competition for this shrinking
of big-bang disruption that Uber and pool of revenue, and weak financial returns
Netflix have wreaked in their respective even after significant cost-cutting.
industries. Nonetheless, the global capital
markets industry is facing a perfect STAGNATING REVENUE
storm of “compressive disruption”
that’s forcing change and reinvention. Following the global financial crisis,
This form of disruption is characterized top-tier investment banks and boutique
by a more gradual erosion of revenue advisory houses have seen their pool
and profit, compressing the amount of revenue stagnate or fall in real terms
of free capital available to invest in the (see Figure 1). While falling margins, low
new technologies and ways of working rates, low volatility, regulatory tightening,
required to keep pace with evolving the rise of passive investments and the
customer expectations and economics.1 plentiful supply of private equity have
created significant headwinds, two
additional trends are worth noting.

Figure 1: Revenue for global and European investment banks is flat-lining

$250bn 60%

$200bn 50%

$150bn 40%

$100bn 20%

$50bn 10%

$0bn 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total industry Share of European majors

Source: Accenture Research

CAPITAL MARKETS TECHNOLOGY 2022 3

European investment banks FICC businesses
First, as Figure 1 shows, the revenue share Second, fixed-income, currencies and
of the leading European investment banks commodities (FICC) businesses, which
shrunk from nearly 40 percent to just once dominated the landscape, have seen
27 percent between 2007 and 2016. This nominal revenue fall sharply and their share
shift reflects not only deliberate business of the shrinking revenue pool dwindle
closures by certain leading players, but (see Figure 2). Interest rate rebounds and
also a reduction in the level of capital periods of increased volatility may provide
allocated to these businesses due to fear profitable relief for some players, but
around business model sustainability. global markets and investment banking
UBS is a key European example of such participants cannot rely on these events
restructuring. Yet, even in this environment alone to deliver sustainable profits.
of reduced competition, the industry’s
financial returns remain weak overall. Despite an uptick in volatility in early 2017,
the most recent Coalition IB Index pegs
global FICC revenue at $38.5 billion for the
first half of 2017, compared to $57.7 billion
for the same period five years ago.2

Figure 2: The FICC share of revenue is shrinking

Primary Primary
24% 29%
2011 FICC 2016 FICC
REVENUE
SHARES
51% REVENUE
SHARES
45%
Equities Equities
25% 27%

Source: Accenture Research

4 CAPITAL MARKETS TECHNOLOGY 2022

INCREASED This development of smaller firms is not
new; it’s a return to a market structure seen
COMPETITION more than 20 years ago. Nonetheless, it’s
Despite the anemic revenue backdrop a trend that’s exacerbating the pressure on
outlined above, capital markets returns in investment banking businesses.
players are still dealing with the rise
of non‑bank competitors in both Secondary businesses
primary and secondary businesses.
The effects of disintermediation are
also evident in the rise of non-bank
Primary businesses liquidity, particularly in mid-corporate
The most visible area is in the high-return and high‑growth segments, and
corporate advisory world, where boutique growing interest in all-to-all exchanges
firms have meaningfully changed the in traditionally dealer-led markets.
competitive landscape (see Figure 3). Forty‑eight percent of market participants
identified buy-side to buy-side trading as
Independent firms, such as Moelis & the most likely new source of liquidity in
Company, Greenhill and Evercore, have the next several years, with 22 percent
nearly doubled their revenue and more believing that non-bank market makers
than doubled their market share over will also play a key role.3 Increases in
the last decade. Considering that this both will be necessary to fill the liquidity
high-margin business tended to be the gap as banks scale back their capital
reason other products and services were commitments. Dealers will remain the
conducted at loss-leading prices, the core source of liquidity in these markets,
impact on shareholder returns is clear. but allowing digitally native providers
to gain a foothold may open the door
to wider competition if aggregation
or direct acquisition takes off.

Figure 3: Boutique advisory houses are on the rise

6,000 30%

5,000 25%

4,000 20%

3,000 15%

2,000 10%

1,000 5%

0 0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenues (USDm) Market share

Source: Accenture Research

CAPITAL MARKETS TECHNOLOGY 2022 5

WEAK RETURNS Legacy infrastructure
Capital requirements for balance sheet-led The sheer size and scale of legacy
businesses (mainly secondary businesses) infrastructure is a particularly challenging
have increased so much that they have issue for the industry. Banks are struggling
destroyed shareholder value generation to achieve sustained profitability because
at even the purest of investment banks. the complex infrastructure established to
Attempts to reduce capital usage by support global and fixed-income markets
management teams has made pure is often vastly oversized and nearly always
advisory business an even larger share siloed. Many have restructured, ruthlessly
of the revenue stream. reduced costs and even exited businesses.

Looking at return on equity for the larger This legacy architecture is also
players in the sector, returns above the ill‑equipped to provide the insights
cost of capital have been inconsistent at required to improve customer service
best (see Figure 4).4 This is despite deep and drive growth in today’s digital world.
and prolonged cost reduction programs, New approaches are needed. Instead
many of which bear significant fruit. of redesigning its legacy stacks for
According to our research, one bank trading in the dealer-to‑dealer market
alone has cut more than $5 billion, or for treasuries, for example, JPMorgan
25 percent, from its non-asset-gathering is leveraging third‑party technology
cost base this decade.5 In real terms, from high‑frequency trading firm
that amounts to a near halving of the Virtu Financial.6
overall cost base.

Figure 4: Return on equity for top nine global investment banks

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Accenture Research based on Capital IQN

6 CAPITAL MARKETS TECHNOLOGY 2022

Regulatory burden If nothing, MiFID2 and FRTB are
reminders that regulators have become
Two major pieces of regulation—the
important agents of change for global
second Markets in Financial Instruments
capital markets players and investment
Directive (MiFID2) and the fundamental
banks—over and above structural
review of the trading book (FRTB)—
changes in customer behavior, the
present both structural and technological
cyclical impact of low rates and low
challenges for investment banks.
volatility, and disruptive new entrants.
A wide-ranging update of the nearly
decade-old MiFID, MiFID2 aims to The rise of non-bank liquidity
increase trade transparency (including A recent Greenwich Associates study
trade costs) via best execution and put forward that one in five government
unbundling, drive liquidity toward more bond investors and one in four interest-
structured trade and reporting venues, rate derivative investors either trade
and improve monitoring of trading with or plan to gain access to non-bank
behavior. Because it applies to a wide liquidity providers.8 That’s because
range of asset classes, most investment non-bank liquidity providers are using
banks will be impacted. Though most technology to offer better pricing and
press coverage has focused on the tighter spreads than traditional dealers
future and economics of investment and ultimately gaining market share.
research, that’s far from the whole story.
MiFID2 will not only impact revenue This shift not only reduces investment
streams and necessitate new compliance banks’ ability to make flow margin as the
investments, but also facilitate the intermediary of choice, but also robs
digitization of customer engagement in those businesses of the information
ways that are likely to create threats and advantage they gain from interacting
opportunities for capital markets players. with both sides of these markets.

Although FRTB is not due for

implementation until the end of 2019,
The solution lies not in cost-
its impact could very well exceed
that of MiFID2. Not only will banks cutting, but rather strategically
have to redesign risk models, largely rethinking the exact shape
away from simple value-at-risk (VaR) of businesses—especially
techniques, but the data collection as regulations such as MiFID2
requirements will be far more onerous.
may begin to create an unlevel
Data currently presents a key barrier to
internal model use; in some areas, the global playing field.
required data simply does not exist.

The technological challenge of capturing

and interpreting this new data burden
comes at a cost. Even if a model passes
muster with regulators (no easy feat),
firms still face capital costs. The last
quantitative impact study of this new
rule set (QIS4) estimated a 40 percent
increase in capital costs for the industry—
a figure that will challenge already weak
returns and potentially drive marginal
players out of certain product lines.7

CAPITAL MARKETS TECHNOLOGY 2022 7

GLOBAL CAPITAL
MARKETS IN 2022
In five years from now, the capital markets industry will still
need to perform similar functions as it does today, but its
roles and activities may change. The nature of these shifts
will depend on regulation and economics, and will likely be
won or lost based on a firm’s ability to successfully combine
business and technology to address shifting expectations.

Between now and 2022, the industry will seeing their rivals accelerate beyond
be shaped by automation, self-service reach. Firms that choose to proactively
expectations, and the continued rise harness these technologies can use
in non-bank liquidity and execution various strategies to break the cycle
providers. In this context, technology of compressive disruption, but it will
offers a way for firms to get ahead. require significant change that goes
Yet global market players that choose far beyond the current portfolio of
to be “fast followers,” particularly technology-led, cost-cutting programs.
those in intermediary functions, risk

8 CAPITAL MARKETS TECHNOLOGY 2022

CAPITAL MARKETS TECHNOLOGY 2022 9
DIGITAL BANKING VERSUS
BANKING DONE DIGITALLY
To create value, capital markets players
must move beyond process replication,
and revisit the core design and architecture
of the firm and industry.
Many investment banks have attempted to update
their legacy systems in the past. By replicating
existing processes with newer technology, they have
been able to achieve incremental efficiencies and
cost savings. In this guise, “going digital” has often
taken the form of a technology or channel change.

Transformational change in other industries has not

been achieved by simply introducing new technologies
to the old stack, but rather through the re-evaluation
of long‑held and widely accepted assumptions about
what is possible. As one fintech industry commentator
said, “It takes NASA $300 million to put an asset
in space; it takes $30 million for SpaceX to do so…
but they also try to land the rocket.”9

Digital leaders have used combinations of new

technologies to create radically different business
and value propositions. They have used platforms,
created and/or contributed to ecosystems (both
shared and open), moved from a product-based
mindset to a customer-centric one, and maintained
consistent service across multiple touchpoints and
channels (both proprietary and shared). The global
capital markets industry has mirrored this with its
thinking around blockchain technology, evolving from
a cost‑mutualization play to collaboratively evaluating
ways to fundamentally alter the fabric of capital markets.

Ultimately, banking done digitally forms a strategy

that is dictated by technology. Becoming a digital bank
means forming strategies empowered by technology.
Achieving the latter requires investment banks
to understand the key organizational imperatives
required to win, and how to orchestrate business
and technology around those imperatives.

10 CAPITAL MARKETS TECHNOLOGY 2022

FIVE TECHNOLOGY DESIGN
PRINCIPLES FOR 2022
Accurately envisioning 2022 today is not possible. Growing
volatility means a small change in assumptions could have
profound impacts on projections. This industry dynamic—
often described as “volatile, uncertain, complex and
ambiguous”—makes it increasingly complicated
to project a future state and execute an appropriate strategy.

Indeed, regulatory and political regime • Second, they will have designed
changes, interest rate uncertainty, an organization that assumes
the rate of emerging technology uncertainty, anticipates change,
maturity and adoption, and firms’ and is capable of deploying
ability to unlock pan‑industry network resources with pace and purpose.
dynamics are among the factors that
will have a significant impact on To make that happen, they will depend
future markets. Gone are the days of on a set of five winning design principles.
multi‑year big bets and commitments,
if they ever truly existed before.

What’s important, however, is that

the leading global capital markets
organizations of 2022 will likely
have achieved two key objectives:

• First, they will have used technology

as a competitive advantage,
moving beyond simple adoption
and redesigning the end-to-end
operating model with customers at
the core (see the “Digital banking
versus banking done digitally”
sidebar on the previous page).

CAPITAL MARKETS TECHNOLOGY 2022 11

1. INTELLIGENT AND AUTOMATED
Deploying technology and organizational designs that use machine
intelligence to automate and amplify human creativity and intuition.

As a suite of technologies, intelligent Many investment banks and buy-

automated systems can provide an side firms are investing in artificial
effective method to reduce process intelligence to aid with pattern
costs. Robotic process automation recognition, with the goal of deriving
technologies are already being deployed alpha-generating insights (e.g., Goldman
and scaled across the back office. In Sachs’ investment in Kensho and UBS
some instances, self-learning systems and Deutsche Bank’s investment in
are also being used to handle exceptions Sqreem).10 This development follows
and optimize workflow productivity. a long history of algorithmic trading
Intelligent and automated organizations and experimentation with machine-
go even further, moving beyond process learning techniques among hedge
replication to redesign processes funds and large asset managers
for the new technological reality. (e.g., BlackRock’s Aladdin platform).11

As the technology advances, firms Thinking about intelligent systems as an

operating in the capital markets extension of the workforce instead of the
industry are quickly adopting more technology estate can help firms realize
intelligent automation technology. other benefits. Automated systems make
The explosion of available data has it possible to build workforces that are
fed a number of use cases that aim to sensitive to business needs and can be
help with the comprehension of more, rapidly retrained, redeployed and rescaled
and more complex, data. These include at speed. Both human and machine
content extraction from unstructured workforces leverage platforms and
data (e.g. videos, images) to support external marketplaces to augment specific
sales efficiency, anomaly detection skills or scale on demand, as dictated by
(as part of know your customer or anti- market and business strategies. Here firms
money laundering monitoring), and are embracing collaboration, running
broader sets of data analysis methods proof‑of-concepts with multiple start‑ups,
(prediction, tooling and classification). open-source technologies and university
data science labs in non‑sensitive areas
of the bank as a way to enlarge and
enrich their talent bases.

12 CAPITAL MARKETS TECHNOLOGY 2022

Artificial intelligence is also being scientists—many of whom work for other
deployed to augment human capabilities. funds or outside the industry—to generate
One organization is using the technology advanced machine-learning allocation
to de-silo functions and accelerate sharing algorithms. To align the distributed
of key operational and client information, workforce, the company has created
leveraging advanced search and discovery an Ethereum-based cryptographic
tools to create a smart data broker that can currency called Numeraire to encourage
funnel key information where it’s needed. participating scientists to collaborate
rather than compete.12
When artificial and human intelligence are
combined, a powerful set of capabilities
becomes available. Numerai, a hedge
fund, shares encrypted financial datasets
with a virtual workforce of 7,500 data

CAPITAL MARKETS TECHNOLOGY 2022 13

2. DATA-LED AND
CLIENT-CENTRIC
Expanding the catalogue of data that’s captured and analyzed
to create real-time views of client needs and behaviors,
and inform service design.

The capital markets industry is no Many of these technology capabilities

stranger to data, but the volume and could become commoditized by 2022—
diversity of data is changing rapidly. even when powered by the promise
Data lake architectures are allowing of advanced computing technology,
a combination of structured and such as quantum computing. Firms can
unstructured data types, sourced differentiate themselves by orienting
both internally and externally. “Exotic” this data-rich approach around a clear,
datasets, including the use of satellite detailed and specific understanding
imagery, direct-from-source transaction of client needs. Doing so means
information, Internet-of-things data, and complementing quantitative datasets
freight and customs data are increasingly with qualitative datasets to better
being used to gain an edge in today’s understand the context in which clients
advisory-focused and insight-led market. engage with services. That understanding
With the deployment of more Internet- needs to be de-siloed, shared and
of-things platforms and the publishing incorporated across the full range of
of more open APIs across industries services, channels and touchpoints.
(e.g., European banking, post-Payment
Services Directive 2), the race for data Using human-centric design principles
will intensify as firms look to find an turns individual customer profiles
edge or sell data to those who can. into a coherent set of services, built
around their objectives. Far from being
As the cost of storage continues to static, these “living services” learn and
drop, firms will be able to store almost evolve, using contextual awareness
everything. But making sense of all this data to adapt and intuitively learn user
will require a coherent data strategy and habits and preferences. That might
management framework, and analytical take the form of trading platforms that
tools to identify clear signals through the understand client intent, and orchestrate
noise. Smart systems can help by finding “next‑best-step” workflows and related
patterns in data and uncovering insights. data feeds in real time, to maximize
Intelligent agents can understand natural- execution speed and efficiency.
language questions, conduct analysis and
produce detailed reports. They can also
be proactive, using graph analytics and
machine-learning algorithms to identify
patterns in huge datasets, and alert sales
staff and relationship managers.

14 CAPITAL MARKETS TECHNOLOGY 2022

3. OPEN AND ACCESSIBLE
Providing the capability for customers and the ecosystem to engage
deeply and seamlessly with the organization, and extending your
reach and capabilities beyond the boundaries of the firm.

Digital leaders make it as easy as Participating and contributing to

possible for customers and partners open‑source projects can also provide
to do business with them, reducing a way to mutualize the costs of product
friction across the commercial journey. development and innovation. Some
New digital standards of integration firms are already working collaboratively
and interoperability, including open with peers on common technology
application programming interfaces and infrastructure challenges. Notable
(APIs), open-source software and shared examples include the Symphony
platforms, can help firms integrate Foundation’s messaging protocols,
seamlessly with customers and extend OpenGamma’s Strata repository of risk
the reach of their partner ecosystems. analytics, and core distributed ledger
protocols from R3CEV and Hyperledger.14
Firms have already begun to offer The invention of crypto‑tokens gives
API services, providing seamless contributors a more direct way to monetize
integrations that deliver beyond portal open protocols, incentivizing and aligning
functionality. More advanced firms a wider group of contributors beyond those
are offering direct access to a wide who will make direct use of the project.
range of internal systems and capabilities
via APIs, while simultaneously uniting
several siloed functions on one platform
As firms become more
(e.g., Goldman Sachs’ Marquee platform).13
transparent, opening services
Leading firms will also use APIs to to direct integration via portals
monetize proprietary datasets and and APIs, they will need to
assets (e.g., pricing, risk or clearing
strike a delicate balance
systems), providing new opportunities
to boost returns on internal investments. between a secure security
Accessible API platforms and developer posture, and easily accessible
portals can cultivate an active developer and usable services.
and partner community, leveraging open
innovation and the power of the crowd
to accelerate service innovation and new
product development. Many organizations
have begun this journey with hackathon
and incubator facilities, but providing
open access to core data and technical
components can accelerate partner
evaluation and ultimately deployment.

CAPITAL MARKETS TECHNOLOGY 2022 15

4. AGILE AND RESILIENT
Designing a “living business” that assumes uncertainty and can adapt
with pace and purpose to changing market and customer needs.

To remain competitive, agility must be built Implementing a zero-based organizational

into both business and IT organizations. design lens ensures each component of
Agility is an often-overused term with the business and IT architectures is aligned
vague aspirational characteristics. In with tactical and strategic imperatives.
contrast, organizational agility is a set This robust evaluation discipline of the
of practical architectural decisions that organization’s architecture provides
facilitates a change in the strategic flexibility to push component parts
direction of a business, either proactively outside the enterprise. Many capital
or reactively, and quickly brings capacity markets players are facing the challenge
and scale into the new direction. of sourcing and retaining specialized
talent to deliver big step-changes.
Microservice architectures reduce Investment banks in particular are
dependency between processes and losing top talent to tech companies and
systems, enabling the quick removal or start‑ups; in 2016, only seven percent of
adaptation of individual parts without US graduates saw banking and capital
significant (i.e., costly and timely) changes markets as a top industry to work for,
and service disruption. Well understood down from 12 percent in 2013.16
in technical contexts, similar structures
are appearing in organizational design. External workforce marketplaces can help
Companies like Amazon and Haier, a banks tap into key talent on demand. They
Chinese consumer electronics and home may take the form of formal marketplaces
appliances company, have adopted for freelance talent (e.g., Upwork, a
decentralized business architectures marketplace for technical freelancers)
comprising small semi‑autonomous or specialized crowdsourcing websites
and self‑organizing teams.15 That has (e.g., Kaggle, a platform that runs data
allowed both organizations to create science challenges).17 Another example is
entrepreneurial and responsive business an AML consortium, which uses advanced
units that can be deployed when analytics platforms to identify potential risk
required without significant upheaval. events before they occur, to address AML
monitoring and surveillance industry-wide.18

16 CAPITAL MARKETS TECHNOLOGY 2022

Resilience can no longer come from Global capital markets organizations can
high walls; it requires an immune tap into a growing ecosystem of vendors
system that can handle a blow and the and utilities, but they need to ensure
ability to adapt quickly to constant a coherent and holistic cyber defense.
change. A proactive and collaborative Interoperability among security products
cybersecurity stance built on intelligent across networking, computing, storage
technologies, crowd-based peer and end-user devices is available through
networks and “inside‑out” security providers such as TestWave and Tripwire,
design will help prepare organizations which scale distributed architectures.
for rapidly evolving threats.

According to Accenture’s 2015 Global

With this movement to the
Risk Management Study, 82 percent of
risk management executives in financial cloud, security becomes
services find that emerging risks in the a shared responsibility with
cyber realm account for more of their service providers. Making this
chief risk officer’s time than ever before. partnership work requires
With the cost of a breach expected to
a willingness and an ability
increase 100 percent per year for each
of the next four years, it’s not difficult to share information with
to see why.19 Advanced technologies third parties, governments
and threats—many readily available and industry groups, such
for purchase online—have created a as the Financial Services
hazardous digital environment. But
new technology can also be used to
Information Sharing and
combat these threats, including artificial Analysis Center (FS-ISAC).
intelligence for monitoring, detection
and first response, data visualization for
front-line staff support and behavioral
analytics, and biometric authentication
for insider threat reduction.

CAPITAL MARKETS TECHNOLOGY 2022 17

5. SIMPLE AND HOMOGENEOUS
Removing unnecessary complexity and friction across the
organization, outsourcing and leveraging utilities where possible.

De-duplication and simplification In the Cloud 100 vision developed

can reduce costs and help prepare by Accenture, non-differentiating
organizations for a more agile assets are transferred outside the
operating environment. Rationalization, traditional boundaries of the firm
replatforming and redesigning the (e.g., all infrastructure and most
backbone of an organization along platforms).20 Some standardized business
digital principles will enable faster processes are also executed, and the
evolution and adaptation to change. associated data is managed by external
Microservice-based business and providers encompassing big tech (e.g.,
technical architectures facilitate faster Microsoft, Google, Amazon, HP) and
adoption of emerging technologies and an ecosystem of industry utilities and
rapid reassembly of core components fintech businesses. Firms only retain
into new complex structures. DevOps- ownership of differentiating assets,
style shared services can be expanded including proprietary processes,
across other business functions to algorithms and data. They also manage
support efficient operations and the deployment, security and integration
shared centers of excellence. of those assets across the cloud and
their portfolio of service providers.
Achieving deep levels of simplification will
also require effort beyond organizational The degree to which public cloud
boundaries, working with peers across the solutions are used will vary depending on
ecosystem to create shared services and the type of capital markets firm and the
platforms that streamline and de-duplicate business model in use. Global markets
industry functions. Distributed ledger players and investment banks that focus
technologies offer the opportunity for on competing in trading markets will likely
capital markets firms to fundamentally alter leverage highly scalable public solutions,
the fabric of markets: the confirmation and while some asset and wealth managers
exchange of ownership of assets. However, may choose to develop hybrid solutions
adoption will require the rethinking and with a differentiating internal private cloud.
reworking of processes and technologies
far beyond the core stack. A fully digitized Beyond the cost benefits of moving
settlement process will feature distributed to consumption-based pricing,
ledger technologies at the core and global capital markets organizations
interoperable technologies around the will gain increased flexibility in the
periphery, including graph-based analytics technology stack and faster access
capabilities that can analyze patterns to new technologies (e.g., artificial
across the distributed network, digital intelligence software-as-a-service).
contract management systems (e.g.,
ClauseMatch), trusted data oracles and
safeguarded on-chain/off-chain exchanges.

18 CAPITAL MARKETS TECHNOLOGY 2022

CAPITAL MARKETS TECHNOLOGY 2022 19
THE HOW:
A DNA OF CONSTANT CHANGE
Global capital markets organizations in 2022 will operate in a state
of constant change, continually chasing the next state rather than
a static target state. To compete effectively, global capital markets
players will need to change their DNA to prepare themselves for
frequent and fast changes toward an ever-evolving future state.

Today’s digital leaders design strategies Leading companies aim to create

that assume constant change. Significant “living businesses”—organizations that
developments and disruptions now effectively mirror the characteristics
appear and scale well within traditional of living organisms by perpetually
three-to-five-year planning cycles (see adapting their strategies, services,
Figure 5). Adapting to these developments platforms and ecosystems to new
generally requires significant changes standards of customer relevance.21
in capital allocation and organizational
resource requirements. Much like an
oil tanker trying to abruptly change Adopting the five design
direction, it’s currently often a slow
principles highlighted in this
process that may cause internal
instability and halt forward progress. paper will surely help facilitate this
change, but an efficient process
To become truly agile, firms need to of continuous investment in
design their business and technical
innovation will also be necessary.
architectures to be able to constantly
evolve toward new business and
organizational models. True agility is
less about predicting the future and
more about designing an organization
that experiments and invests in innovation,
and can quickly deploy talent and
technology to scale the next state.

20 CAPITAL MARKETS TECHNOLOGY 2022

Figure 5: Significant change is occurring within traditional strategic planning timeframes
Average planning cycle 3 years Average planning cycle 5 years

5 years: Top 100 Fastest Unicorns achieve valuation within 5 yearsi

3 years 7 months: Lufax achieves a $10bn valuation (Sep 2011-April 2015)ii

3 years 5 months: Robinhood achieves a $1.3bn valuation

(Dec 2013-Apr 2017)iii

3 years 11 months: Y’ue Bao becomes the world's largest money market fund
(June 2013-May 2017)iv

1 year 2 months: Citadel achieves largest share of US Interest Rate Swap market by trade volume,
and third largest by dollar volume on Bloomberg SEF (Oct 2014-Dec 2015)v

3 years: Combined market share of top 5 global

FX dealers sinks from 53% to 44% (2013-2016)vi

3 years: VC-backed fintech investment increases

433% from $0.3bn to $1.6bn (2012-2015)vii

Approx. 2 years (based ICOs surpass venture funding as the primary funding
on mainstream adoption): for distributed ledger start-upsviii

New competitors emerge and scale Industry incumbents shift into new positions

Significant investment is allocated towards new technologies

Accenture research based on public sources:

i
https://fleximize.com/unicorns/
ii
https://www.wsj.com/articles/chinas-lufax-valued-at-nearly-10-billion-in-recent-funding-round-1429164241
iii
https://techcrunch.com/2017/03/31/now-whos-the-rich/, https://www.crunchbase.com/organization/analyst
iv
https://www.bloomberg.com/news/articles/2017-05-15/world-s-biggest-money-fund-said-to-face-pressure-to-slow-inflows
v
https://www.risk.net/awards/2442287/interest-rate-derivatives-house-year-citadel-securities,
https://www.wsj.com/articles/citadel-makes-inroads-into-swaps-arena-1434997210
vi
https://www.fnlondon.com/articles/fxs-new-breed-chips-away-at-dominant-banks-20170623
vii
https://www.cbinsights.com/research/report/fintech-trends-2016/
viii
https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html

CAPITAL MARKETS TECHNOLOGY 2022 21

INVESTMENT AND INNOVATION
The sheer pace of growth of investment in But the goal is not solely to maximize
new technologies and business models the total sum of investment dollars
means developing significant investment available. Firms need to ensure that they
capacity must be a priority (see Figure are getting the best possible return on
6). Building this capacity requires a their innovation investments by adopting
continuous process of unlocking free new execution tools and techniques.
cash flow from the core business, using That requires the creation of an innovation
zero-based organization methods and architecture—a set of capabilities and
leveraging the digital technologies clear governance principles to support
documented previously in this paper. the firm’s portfolio of innovation activities.

Figure 6: Capital markets investments in key digital and emerging technologies

EMERGING IT SPENDING 2017 GROWTH RATE

TECHNOLOGY (US$ BILLION) 2017–2018

Advanced analytics 2.4 15%

Big data 2.3 3%

Artificial intelligence 1.68 14%

Alternative data 1.4 18%

Cloud computing 1.2 19%

Robotic process automation 0.4 10%

Digitization 0.32 9%

Blockchain 0.17 11%

Visualization 0.12 7%

Note: Categories are not mutually exclusive.

Source: © Opimas LLC - used by permission

22 CAPITAL MARKETS TECHNOLOGY 2022

GOVERNANCE To maximize investment efficiency,
removing organizational silos within
Firms need to create an investment innovation groups is key. This facilitates
capability that is capable of bringing the pooling of resources for innovation,
scale and capacity to sudden changes encourages cross-pollination of ideas
in investment direction. You cannot and and ensures that investments align with
should not jump on board every business the top strategic priorities of the firm. But
or technology fad. Instead, you need to innovation groups must ensure that they
establish clear investment governance do not become administrative blockers
to assess opportunities as they arise. for new opportunities or over-centralized
command-and-control centers.
It starts with an innovation agenda.
Rather than a list of technology ideas
(supply‑led), an innovation agenda
should mirror the strategic imperatives
By positioning innovation groups
of the firm (demand-led). For “moonshot as platforms for the wider
divisions” (i.e., innovation capabilities enterprise, they can provide
working on brand-new industry talent and tools to support
paradigms), these agendas tend to be
employee ideas and ventures,
broad and question-led. For nearer-term
innovation teams, agendas should avoid and encourage the cultivation
lofty business aspirations and dig deep of an inclusive innovation
to find small, specific points of leverage culture across the organization.
that can deliver strategic step-changes.

Evaluating opportunities also requires

a new approach. Unlike traditional
methods, this does not necessarily
mean relying on pre-investment business
cases based on internal assumptions
and historical data. Instead, firms
should invest in as many opportunities
as possible, focusing initial seed
investments on creating business
cases based on validated learning
(e.g., end-user testing, evidence of
customer activity or workarounds,
technology feasibility assessments).
Firms should then continue to invest
in increments, evaluating the venture
at each stage with a “persevere,”
“pivot” or “park” decision.

CAPITAL MARKETS TECHNOLOGY 2022 23

INNOVATION EXECUTION
To maximize investment and execution Crucially, the architecture must not be
efficiency, firms need to adopt new ways built as a wholly removed entity. With
of working that are more conducive to the almost half of firms citing siloed business
experimental work of innovation. Start- lines and a lack of collaboration with
ups exemplify these new ways of working, innovation teams as the biggest blockers
borrowing from techniques found in to innovation, innovation groups must
design, agile software development and be careful to not insulate themselves
adapted lean production principles to from core business lines.22
quickly formulate high-impact, user-
centric solutions, even when operating
in resource-scarce environments. But Removing these silos unlocks
while there is much to learn from these
the ability to harvest valuable
start-up teams, global capital markets
players must be careful not to “throw end‑user feedback, and focuses
the baby out with the bath water.” the innovation group’s targets
Although traditionally less nimble and with key performance indicators
more risk averse, large corporations (KPIs) that will make a real
also hold a significant amount of assets
that can accelerate the scaling of new
difference in the organization.
innovations. An innovation architecture
should leverage the respective benefits
of start-ups and corporations, and work
to mitigate the negative constraints of
both. Figure 7 identifies some of the
key groups that should be involved.

Figure 7: Key groups and roles for building an innovation architecture

RESEARCH
STRATEGY FUNDING AND INSIGHT

Business and service design, Central innovation portfolio, Market snapshots, trends,
business canvas and business seed rounds and external operational analytics platforms,
plan, execution strategy financing management, lean analytics, KPI strategies,
overall finance admin advice, user testing and interview
business case modelling support, tester sourcing

GOVERNANCE
LEGAL AND COACHING ECOSYSTEM

Partner/vendor contracting, Innovation process Fintech and consortia

intellectual property protection, management, delivery leads, engagement, open-source
data protection, terms of scrum/agile coaches licensing and contribution,
service, patent filing open hackathons

Source: Accenture Research

24 CAPITAL MARKETS TECHNOLOGY 2022

Figure 8: The investment banking stack for 2022

TODAY 2022
EARLY POCS AND GREATER BREADTH AND
UNDER UTILIZATION DEPTH OF ADOPTION
OF TECHNOLOGIES ACROSS THE STACK
Portal based with some Opti-channel strategies
omni-channel service and embedded invisible
provisions across devices service provisions in place

Early adoption of utilities; Business Utilities and fintechs fulfill

fintech partnerships Functions some functions in full
supplement offerings
Ecosystem Intelligent systems deliver
Early use of robotic process complex decision-support
automation and artificial in collaboration with humans
Intelligent
intelligence systems
Automation Analytics on external,
Early client and operational “App Store” shared, and unstructured
analytics based mostly data drive customer
on internal, siloed data engagement and end-to-end
Digital operational excellence
Digital settlement PoCs, Settlement
focus on relatively simple Shared digital settlement
and Utilities
transaction flows platforms go-live; businesses
emerge built on-top
Early cloud engagement Cyber & Cloud of new infrastructure
with private and some Infrastructure
hybrid implementations Public cloud provides
IaaS and PaaS to majority
of functions

Source: Accenture Research

CAPITAL MARKETS TECHNOLOGY 2022 25

BRINGING IT TOGETHER:
GLOBAL CAPITAL MARKETS 2022
Adopting our five design principles will have a visible impact on
an organization’s structure and talent base. A componentized
form will make it possible to take advantage of shared services
and platforms across the enterprise, while preventing a return
to the siloed inefficiencies of the past. Internally, operational
decision-making will be pushed to lower levels, enabling
focused leaders on the ground to quickly change directions and
spur growth. That creates a more fluid structure, accelerating
the realization of a seamless “plug-and-play” ecosystem of
third-party providers that will deliver organizational agility.

Official headcounts are likely to decrease Firms seeking technical dominance

as firms carve out operational functions will knowingly pay a high premium for
to shared platforms and utilities, and advanced engineering and data science
automate the front office, switching skills as they compete with firms across
traders for engineers and algorithms. At industry sectors in an already crowded
the same time, unofficial headcounts will marketplace. Winning this talent war
increase as organizations take advantage will require a markedly different
of external workforces and communities approach than in previous decades,
to access niche talent on demand. thanks to changing attitudes toward
work, and new non-salary employment
Talent mixes will diverge as global expectations created by start-ups
capital markets players follow different and large technology companies.
strategies. While a technical base will
be common across all organizations,
the size of their footprints will differ.

26 CAPITAL MARKETS TECHNOLOGY 2022

Others will direct premiums toward
dealmakers, employing tools to measure
and augment employees’ emotional
intelligence and soft skills. Technology
skills will still be important, but these
firms will employ a new breed of data
science and engineering platforms that
make advanced technologies more
accessible to the wider, non-technical
workforce. User interface innovations
in voice interaction, and augmented
and virtual reality, are already simplifying
how we interact with technology,
making it possible to communicate in
more powerful ways with more powerful
outcomes. Many leading technology tools
can already be operated with minimal or
no technical skills (e.g., Blue Prism, Ayasdi).

CAPITAL MARKETS TECHNOLOGY 2022 27

FOUR STARTING
POINTS FOR TODAY
Change is not cheap, but the adoption of a small set of key trends
can not only begin to align the organization with the five technology
design principles, but also help unlock the capacity required to invest
purposefully in the new business. Based on Accenture’s analysis
from our project experience and realized benefits with clients,
we’ve seen significant value along the following key interventions:

Digital ecosystem: The emergence Client-centric analytics: Real-time

of digitally enabled ecosystems that analysis and visualization across vast
provide component services across datasets, enabling greater customer
technology, processes, skills and data. insight and responsiveness.
Accenture estimates that a broader use of In addition to smarter customer
industry utilities could deliver significant segmentation, and deeper awareness
savings. In an area such as post-trade of client profitability and cross-selling
processing, using a utility could deliver opportunities, a better understanding
up to 30 percent or more of savings of your customer profile could help
across the enterprise in a steady state. streamline and rationalize client support
On typical baseline profiles, that could operations. In selected cases, such
translate into more than $10 million of interventions could generate annual cost
savings per year. savings in the double-digit millions.

Intelligent enterprise: A virtual Digital settlement: Digitized assets that

workforce that independently leverage distributed ledgers to optimize
completes customer-facing and post-trade settlement, re-architect
operational tasks to provide increased processes and release trapped capital.
enterprise scalability and agility. Distributed ledger technologies could
Accenture’s experience in deploying drive $8 billion in savings on a cost
intelligent automation technologies base of $30 billion across eight of
across capital markets organizations the top 10 global investment banks.23
suggests that most firms could reduce For example, our research shows that
FTE costs by up to 30 percent from significant parts of the trade process—
defined back-office and corporate including reconciliation, confirmation
processes alone. and trade-break analysis—could be
reduced or completely eliminated,
leading to potential costs savings
of 50 percent across trade support
and middle-office functions.

28 CAPITAL MARKETS TECHNOLOGY 2022

Together, these interventions could
impact cost bases sufficiently to lead to When both regulators and
a return to sustainable double-digit RoE management appreciate the
and materially improved profitability—
not only taking a firm on the path to
power of modern data science
technology-driven transformation, but and analytics in these areas, then
also freeing up capital that could be the industry will be on course for
used for more ambitious investments. a potentially lower‑risk banking
There is, however, one area that could
system without simply choking
yield even greater improvements in credit from the economy.
returns than the four points mentioned
on the previous page: reducing
capital requirements. Regulators are
consistently pushing for greater capital
backing through global frameworks
like Basel 3, minimum requirements
for eligible liabilities and the FRTB.
The panacea would involve using
intelligent automation to monitor risks
much closer to real time, big data and
machine learning to identify forward
stress indicators far faster than humans,
and anonymized and centralized pooling
of balance sheet data (perhaps on a
blockchain) to see risks in areas that
aren’t even on your balance sheet.

CAPITAL MARKETS TECHNOLOGY 2022 29

CONCLUSION
The global capital markets of 2022 will deliver the same
outcomes and industry needs: they will help companies
and governments raise capital, they will help investors find
and access returns, and they will help manage financial
risks. But the way in which these outcomes are delivered is
likely to change dramatically, strongly influenced by new
technology paradigms and digitally-led operating models.

As we journey toward 2022, technology Following these five design technology

will be a way for firms operating in the principles and getting the technology
capital markets industry to get ahead and strategy right is imperative, but it’s
differentiate. The successful ones will only one side of the coin. The other
be able to point technology in the right is taking a view on where value is
direction, align it to their business needs migrating across the ecosystem, and
and execute seamlessly. Technology, realigning your business and operating
after all, is simply a tool that can provide models toward it—not just within today’s
scale and rapid access to insight buy-side, sell-side and infrastructure
and information—it rarely determines models, but also across them.
the service that needs to be scaled.

To lead, firms will need to move beyond

Many firms operating in the
purely thinking of digital in the pursuit
of cheaper operating costs, to rethinking capital markets industry have had
and repurposing the organization for a fully their ability to fully control their
digitized economy. That means learning own destiny reduced over the last
to be sensitive to the changing customer— decade. With the right network
encompassing the functional, emotional
of talent and technology, and a
and social needs that together drive their
expectations and experiences. It means commitment to bold change and
being more open and accessible—being innovation, the next decade will
able to use platforms, talent pools and give them the ability to find new
networks to orchestrate services around ground in which to thrive.
their clients, while extending their reach.
It means designing business and operating
models around constant change—
continuously unlocking investment
capacity to invest in innovation, and
building a simpler architecture that
supports resilience and agility.

30 CAPITAL MARKETS TECHNOLOGY 2022

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CAPITAL MARKETS TECHNOLOGY 2022 31

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