Market players are bullish on the near- and longer-term promise of fintech, according to new research by Opimas, “Fintech Spending and Innovation in Capital Markets”.

In 2017, it estimates fintech spending across all capital markets participants to exceed $127 billion.

Banks/financial institutions have already invested in 44 fintech deals this year, with Goldman Sachs and JP Morgan Chase among “the most aggressive on the investment front”. The former has made 15 unique investments, Opimas has found, while the latter has nine.

Opportunities for investment in fintech start-ups “abound”, the research and consultancy firm states.

“The growing influence of fintech in the capital markets is undeniable, arming three distinct groups of players in the drive to increase revenues and market share,” Opimas says. These are:

  • financial institutions relying on fintech to create new business and operational models (e.g. Goldman Sachs and JP Morgan);
  • “a new breed of market participants, whose business models are fully propelled by fintech”, such as XTX Markets, WorldQuant and Addepar;
  • fintech start-ups that are focused on capital markets and whose “enhanced functionality, speed and lower cost come at the expense of established software and technology providers to financial institutions” – e.g. Symphony and AlphaSense.

Optimas Analysis

 

Highlights:

  • Three areas stand out in 2017 as the largest in terms of investment: order and execution management ($19 billion); post-trade transaction processing ($14.6 billion); and analytics ($12 billion).
  • Technology spending by step in the value chain includes capital structure ($2.5 billion); pre-trade ($21.9 billion); at trade ($33.3 billion), post-trade ($42 billion), risk management ($22 billion), and regtech ($6 billion).
  • The nine emerging technologies in capital markets that hold the greatest potential in the near term are: artificial intelligence (AI), advanced analytics, visualisation, blockchain, big data, robotic process automation (RPA), cloud computing, digitisation, and alternative data.

Optimas Analysis 1


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