Key to the highway: The changing face of high and low touch execution

In the beginning, there was high touch where brokers provided a high-value, solution-based approach to finding the liquidity their buy-side clients were looking for. This worked in an era of high fees and low scrutiny of what end investor trading commissions were actually funding. But as markets electronified, and buy-side operations tooled up, a new paradigm was born, low touch. This reflected the buy-side's growing desire for cheaper execution, especially for trades that weren’t that hard to execute, and it also offered a path that minimised information leakage.

The result? Two routes to market with very different price tags. The problem was that brokers had to duplicate their trading infrastructure despite receiving fewer net commission dollars. This spawned the short-lived concept of mid touch which offered the worst of both worlds: junior sales traders with neither the experience nor the expertise to manage either. And so the industry muddled along ignoring the operational overhead of running two technology stacks.

The future of the banking industry

Every month we see huge developments and changes happening in the banking industry. In September, IBM released research suggesting that 65% of banks have plans to put blockchain projects in production in three years’ time. Meanwhile the CMA recently released findings stating that banks are not working hard enough for their customers, and the BBC claims more than 600 High Street bank branches have closed in the UK in the past year. On top of this, traditional retail banks are facing increasing competition from digital-first challenger banks such as Monzo (formerly Mondo) and Atom.

The changes aren’t just coming from within the industry, but also from a huge shift in customer expectations. 51% of US adults bank online, as do 47% of Europeans, and this number is likely to increase as more Millennials buy in to financial services. This is part of a wider customer attitude that banks should be using the latest popular technology to provide the best service to their customers. However, with new expectations and technologies emerging all the time, how can the banking industry adapt to this digital world?

How FIs can transform to ride the digitalisation wave

Banks and insurance companies that are able to transform themselves will be well placed to benefit from digitalisation. However, most companies remain unprepared.

According to a 2015 pan-European survey by Arthur D. Little, financial institutions are less adapted to digitalisation than the cross-industry average. Although most companies have undergone considerable investments in order to update their IT capabilities and architecture, other key functional aspects are lagging behind, organisation being one of the most critical ones.

Millennials demand digital banking

Millennials hold the key to the future of banking. By 2018, they will have the highest spending power of any generation, and by 2025 three quarters of workers globally will be a millennial. Challenging the status quo, a third of millennials don’t believe they’ll need a bank in the next five years.

Apathy towards traditional banks is born of frustration. For a generation who have embraced the likes of Google, Amazon and Uber, feeling the need to use a physical branch to make financial decisions is unappealing.

Banking is a battlefield

• For anyone who wasn’t around for the 80s, any karaoke bar experience virtually guarantees that the Pat Benatar tune 'Love is a Battlefield' comes to mind when anything is called a 'battlefield': banking included.

Sad thing is, when it comes to core banking systems, legacy status means any claim of 'we are young, we are strong, no one can tell us we’re wrong' is laughable at best, an utter lie at worst.

To branch or not to branch... is that the right question?

• The quest to justify banking's oldest distribution channel continues despite the wonders of self-service automated kiosks and the growing adoption of mobile banking. 
• 
  
• The arguments for and against branch banking are well publicised these days, and yet we continue to debate the subject year after year.

Do we need the digital-only bank?

Post-crisis a lot of people don’t trust banks. You can’t really blame them, it’s just the way things are now. That mistrust hasn’t stopped people using their banks, of course – where else would they keep their money? Apart from stuffing it into the mattress there isn’t much choice.

Never fear, those of you clamouring for a different way to do banking (raise your hands – anyone?), as a wave of digital-only banks have arrived to save the day.

(Survey) Blockin' all over the world: Is Blockchain all it's cracked up to be?

Blockchain focused start-ups are springing up like mushrooms after the rain, and the big banks all seem to be investing in this space. But is this just a ‘fashion craze’ (loom bands, anyone?) and the big guys just want to show that they are technologically advanced and forward-looking, whilst the new guys want to cash in quick before the world moves on to the next big thing?

SIA Expo 2014: the inside track

Panel discussion at SIA Expo 2014

The main theme of this year's SIA Expo conference in Milan was that we are moving towards a more digital world, enforced with the strapline: 'Don't worry, be digital'. Although the majority of Italian citizens believe their country lags behind the rest of Europe in digital payments, speakers were keen to explore how attitudes could be changed in the country. The event focused on payments, mobile technology and innovation in the financial services space and was organised by Italy-based service provider, SIA.