7 Recent Trends in Investment Banking Technology

Artificial Intelligence (AI) and machine learning have transformed the use of investment data and are now helping banks better understand consumer trends, point-of-sale credit decisions, and other gaps in supply and demand. Since AI also has the potential to automate trade processing for investors, AI-driven banks offer faster trades. Some of them utilize specialized learning techniques to identify and predict possible successful investment strategies for customers.

Another way AI has revolutionized the fintech space is by its efficient fraud detection and credit-rating algorithms. Thanks to AI, fraudulent transactions can be flagged in advance and then verified manually to limit investment scams. Also, smaller fintech startups with limited consumer data are in a better position to assess the credit-rating and repayment capacity of consumers and then disburse loans without collateral.

AI is currently being used by Man AHL, a London-based company, to identify profitable investment strategies and execute trades over several global financial markets automatically.

Most businesses are now moving towards direct listings instead of IPOs to raise capital. With IPOs, the companies have to hire underwriters who facilitate the IPO process and charge a commission for their work. Those who can't afford to underwrite, don't want share dilution, or are avoiding lockup periods often choose the direct listing process instead.

This shift towards direct listings has created a demand for new technological platforms that will help small and medium-sized companies with the entire process. It is reasonable to assume that a wide range of off-the-shelf technology solutions for direct listings that will help companies save millions of dollars will be introduced in the near future.

Spotify and Palantir are great examples of companies that have opted for direct listings instead of IPOs.

Natural Language Programming (NLP), with the help of AI, is improving the interactions between computers and the human language. NLP is helping investment analysts process unstructured data into structured, measurable data at a much faster rate than ever before. It has the potential to crunch annual investment reports, investor calls, and regulator statements and convert all of it into digestible information.

NLP has seen widely used applications in the due diligence process. Due diligence teams can now leverage NLP to process information faster and improve the efficiency of an otherwise time-consuming activity.

FinBERT is a brilliant example of NLP in use in the investment sector. It uses pre-trained language models to perform financial sentiment analysis of certain data sets. This analysis tells how the market will react to a certain piece of information in terms of stock price rise or fall.

A Virtual Data Room (VDR) is an online database that can store confidential information in a secure manner. VDRs are usually used as ongoing repositories for financial information, allowing businesses to store, secure, and safely access their critical documents.

With cyber attacks on the rise, VDRs have provided a great solution for banks to store sensitive corporate data virtually. They are particularly useful in storing deal-making information for mergers, acquisitions, and company IPOs. Access to this information is given only to the relevant parties, which leads to increased productivity, better security, and improved regulatory compliance.

The tech-giant Amazon is currently earning only 30% of its income from retail, while the rest is earned through its virtual data services AWS.

Blockchain is an extremely safe and highly traceable method for doing transactions virtually. Multiple cryptocurrencies that are based on the blockchain are being used in these dealings.

The financial services sector is also experiencing an enhanced rate of adoption of blockchain due to a couple of reasons. Firstly, it replaces intermediaries between fund transfers and provides a peer-to-peer method for making transactions. Secondly, the blockchain is extremely secure and almost impossible to tamper with. The chances for any type of fraudulent activity to occur are non-existent.

Although blockchain technology is incredibly useful, it hasn’t experienced growth as fast as AI or machine learning. This is because blockchain is a slightly complex concept that isn’t easily digested by average consumers. Also, since cryptocurrencies are still unregulated in most parts of the world, there is a lack of trust for transactions on the blockchain, which is hindering mass adoption.

Several cryptocurrency wallets such as DDKOIN and OKEx are making active use of blockchain to process, hold, and transact cryptocurrencies for users.

All blue-chip investment banks now have fancy apps that provide services they previously offered inside a physical branch. Some of these services include access to real-time market data, the latest market intelligence, industry reports, and so on.

Users can create customized dashboards that allow them to share data directly with their representatives. The best part is that as more APIs are developed, these apps work directly with many other investment apps, making it even easier for consumers.

Acorns and Affirm are two apps that offer a wide range of financial and investment-related services, but they are only the tip of the iceberg. There are dozens of others offering similar services in the investment banking space.

Relationship management systems are designed specifically for deal-driven teams to streamline their business development workflow and make their networks work for them. The key relationships investment bankers have, and the matrix of relationships networked across industry groups, product groups, and financial sponsor coverage teams make up your greatest technological asset. If you manage this asset efficiently, you can do wonders in the investment banking space.

Dedicated Customer Relationship Management (CRM) tools such as Dynamics 365 provide lots of analytics and automation capabilities that you can use to nurture customer relationships and get the most out of them.

Having access to the latest banking technology can be of great help, but what is more important is how you put it to use. And if you don’t apply it right, even the most advanced technology can’t help you.

Choosing a reliable software partner for your company may be just what you need to become the next unicorn in the investment banking space. If you need help, Geniusee is always available to bring your fintech dreams to life.