As 2020 dawns, the banking and financial industry is already a long way off – from open trading on physical exchanges to algorithmic trading. We have moved from paper savings accounts to robo-advisers. Here are the top investment banking trends to watch out for.
Borrowing from Bob Dylan, times change ”
The current crop of technologies – cloud computing, social media, AI, machine learning, e-commerce, big data – all are redefining this century and beyond.
Technological innovation in all sectors has become an inseparable cocktail, and this is especially true for financial institutions. Nowhere has this combination been more powerful than in the investment banking industry.
Holding companies today are looking for an intersection with technology. Navi Technologies, formerly known as BAC Acquisitions, an investment holding company, is looking for opportunities to invest in technologies to increase financial services.
What are these developments for investment banking professionals and the markets of tomorrow? Here we take a look at the critical trends in the juicy investing industry that you need to stay on top of.
Important 2020 trends to watch that are changing the landscape of the investment industry.
Mid-sized businesses are becoming the hot target.
Goldman Sachs recently announced plans to boost investment in mid-sized companies. While the investment banking giant has been serving midsize businesses, this has been done on an ad hoc basis in the past.
It plans to expand on a large scale with a cross-market group (CMG) which is expected to provide investment banking products to mid-sized companies. David Solomon, president and CEO of the American bank, says:
There are many companies valued between $ 500 billion and $ 3 billion. This is the real growth opportunity for the company.
As a result of this focus on emerging private companies, the number of investment bankers and M&A negotiators hired for operations will see an increase, as well as a peak in the number of regional units. .
Besides Goldman, many other banks are eyeing this segment, including JP Morgan, Wells Farago, Citigroup, among others.
Rising Initial Coin Supply (ICO).
It's a new way to fundraise. The Initial Coin Offering (ICO) is the cryptocurrency equivalent to the Initial Public Offering (IPO) in the investment bank. It offers cryptocurrency-based businesses the means to raise funds for their new app, service, or digital coin.
Investors buy these deals and receive a cryptocurrency token from the company offering in the hope that successful projects will lead to a rise in the value of the token.
The Economist, a popular financial publication says this about the ICO,
These are digital coupons that can be easily redeemed, although unlike stocks, they do not confer any ownership rights.
Among the successful coin offerings, the story of Bancor is worth noting. Bancor is a blockchain-based prediction marketplace that has been hugely successful due to its unique offerings. Bancor generates liquid tokens which allow their conversion into other tokens.
For example, a user can purchase a Bancor token which can be a combination of 50% Ether and 50% Litecoin. It caught the eye, and ultimately, a buy-in from a Blockchain Capital venture capitalist and early internet investor Tim Draper.
Storj is another blockchain-based cloud storage company that has successfully leveraged ICO.
To engage in ICO, you will need to develop a basic understanding of cryptocurrency wallets and engage in digital currencies.
The assets of “Robo-Advisors” will reach US $ 2 trillion in 2020.
Many investment banking advisers, stockbrokers and other financial professionals have lost part of their business to robo-advisers. An example of this trend is Betterment. Robo-advisers are algorithm-based advisers that work with little or no human intervention.
The hallmark of a business is the ease of online access available to customers. It is becoming particularly popular among young investors and next-generation digital savvy consumers.
A typical robo-advisor collects information from clients about their financial health and future goals. The robo-advisor then uses this data to advise clients and automatically invest their assets.
Some of the best robot advisers can create accounts easily, plan goals robustly, provide account services, manage portfolios, and offer security features at a very low price.
Firstly, Betterment's Robot-Advisor was launched in 2008. After a decade, Betterment's Robot-Advisor has now become capable of handling complex tasks such as selecting investments, planning for retirement, harvesting tax losses and much more.
The growth of robo-advisers reached (in terms of client assets managed by them) US $ 60 billion in 2015, and the industry is expected to reach US $ 2 trillion in 2020 and approximately US $ 7 trillion in 2020. # 39; by 2025.
5G and BFSI (banking, financial services and insurance).
The era of hyper-connectivity with 5G will also change the dynamics of the finance, insurance and investment banking industry. As devices get smarter and faster, so will the services offered.
The years to come now may be the 'smarter' time when updated smart finance apps will use 5G. A vast network of devices and over 20 billion items, from dryers and cars, to bank accounts and investment wallets, will be interconnected in this 5G revolution.
The huge data generated in the process is poised to make better and smarter investment decisions.
Building "Perfectly Efficient Markets" with AI.
Speaking about the future of the stock exchanges, Adena Friedman, CEO of NASDAQ, says we will get closer to perfectly efficient markets. The continued march towards AI may empower the investment banking industry to make better decisions through the barrage of data being generated. Friedman says, as data accumulates over the next 10-20 years, quantum computing will give the investment industry the ability to examine thousands of results in seconds. and draw the right conclusions – about price, buying and selling, and more.
AI tools can weed out bad behavior – insider trading, market manipulation and anything that makes markets unfair.
In the field of AI, NASDAQ plans to provide technological tools underpinning financial market data and information to other exchanges, regulators and brokers. The hope is to propel investors into financial markets with AI.
Equity Crowdfunding is a reliable mode of alternative investment.
Equity crowdfunding is the online offering of private company securities like debt, stocks, convertible notes, etc. to a group of people. The reliable mode of crowdfunding has become a popular method of fundraising for private companies and startups. Small business owners provide information about their financing needs and activities on these websites and solicit financial pledges from people.
Many investment banking professionals have launched their equity crowdfunding platforms. Among the most popular crowdfunding arenas are Indiegogo and Kickstarter. Kickstarter is the best suited platform for creative professionals looking to raise funds for their projects. Indiegogo, on the other hand, helps tech companies launch their products.
Equity crowdfunding, unlike traditional product crowdfunding, provides real equity in companies to investors.
GoSun, GOffee and Miso Robotics recently launched their equity crowdfunding campaigns. This method of financing offers greater flexibility to business owners than the traditional route of venture capital.
Need coding skills.
Investment banking professionals will need to understand and know the technology behind algorithms, as more and more operations move towards it. The banking, finance and insurance industry has already started recruiting more IT professionals with the goal of having an in-house IT and data team.
Whether you are in banking, portfolio management, risk management, or another area of finance, you will need to be able to program in at least one programming language.
Stock picking was once a coveted skill, but now investors no longer focus on it. Passive funds run on autopilot automate the security selection process.
Cybersecurity and investment banking.
The past year and the years to come will be important for the confluence of cyberspace and investment banking from a cybersecurity perspective. Besides companies like Google and Cisco, financial services companies like JPMorgan Chase are increasing their investments in security startups.
In 2019, investments in cybersecurity amounted to more than US $ 23 billion, and spending in this sector is expected to reach US $ 151.2 billion by 2023.
These are the main trends in the banking and financial sector for 2020, and a look at what the investment industry is ahead of compared to previous years and decades.