Corporate and investment banking might look complicated and regulation-bound, but the sector was an early champion of technology and paved the way for many developments.
If a fintech professional is asked which area of banking excites them most, the chances are they will not say corporate and investment banking (CIB). The fintech limelight has clearly been stolen by retail banks, with their experiments in facial recognition technology, and payments divisions, the latter of which are leading the distributed ledger technology revolution. The fact CIB can be intimidatingly complex to an outsider – combined with regulators pushing firms to prioritise regtech – has not exactly facilitated the adoption of fintech by front offices.
But before ‘fintech’ became a buzzword, CIB was actually a leader in banking technology. The move by equities and foreign exchange (FX) from voice to electronic trading in the early 1990s predates the rollout of online banking and non-bank payment firms. In 2003, a consortium of investment banks backed the launch of Markit as an independent source of credit derivative pricing. Today, the financial data firm is an important capital markets player.
The fintech limelight has clearly been stolen by retail banks, with their experiments in facial recognition technology, and payments divisions
Much of the artificial intelligence and machine learning now being applied to trading is simply a more advanced form of statistical modelling that has been used for years. Data analytics in capital markets is not new – as Stuart Riley, Citi Markets and Securities Services’ global head of operations and technology, notes. “What’s happening now is industry participants are treating data with greater care as they’ve realised it can fundamentally change their businesses,” he says.
Perhaps the best example of CIB’s tech leadership is the proliferation of multi-dealer platforms. Instead of restricting clients to trade bilaterally via in-house systems, bond and FX brokers are trading on third-party platforms that allow clients to choose the best liquidity provider for any trade.
It is akin to the issues retail banks are now grappling with under open banking. The requirement to open application programming interfaces (better known as APIs) and share customer data with third parties has forced many to ponder the future of their apps and online banking platforms. These could soon be disintermediated by non-banks that can now offer individuals a dashboard of their various financial accounts provided by different institutions.
Retail and payments may be the current leaders in fintech, but CIB was its pioneer.
