Making digital transformation more than a buzzword through the lens of a technologist
As the era of digital transformation continues to revolutionize every industry from healthcare to banking, the impacts on niche market sectors like securities finance can be harder to parse–but just as transformative. What are the key impacts of the new digital age on securities finance? It’s a question that technologists in sec finance must answer–but it’s nearly impossible to scratch the surface without agreeing to a common definition of digital transformation. Interpretations will always vary, and that’s what makes this space so rich. But in order to move forward, we must find common ground. This is my viewpoint, as a technologist and a staunch believer in a principle borrowed from architecture: form follows function.
The context for why digital transformation is critically important now is no secret, so I won’t spend too much time on it. Here is what we know: 1) The opportunity to activate real digital transformation in financial organizations (across the industry, not just in sec finance) is now; 2) The pandemic accelerated the adoption of many technologies by about 10 years, presenting us with an unexpected yet golden opportunity to activate digital transformation (76% of institutions cited the pandemic as a catalyst for reviewing and wanting to change their IT infrastructure, according to this survey); and 3) The clock is ticking. This opportunity will not last forever. Each passing year we see the patchwork of outdated technology get more layered, more complex, and more expensive. In 2019, the largest banks globally budgeted to spend $67 billion on IT, with 50 percent or less going toward new technology (which means the rest was spent on maintaining the old). Aging technology can cost each worker 24 hours of wasted time per year, according to a Tech Talk survey.
So, why aren’t we jumping at the chance to change? It’s no secret that digital transformation projects are difficult. They are expensive (hard to get started), take a long time (hard to see through), and may present risks for those who champion them (hard to find advocates and internal sponsors). Despite these challenges, capital markets have done a lot to digitize: From the development of the FIX protocol, to the transformation of social, mobile, analytics, and cloud within the past decade, sustainable technological advancements have altered–and continue to alter–sec finance. But these trends aren’t new. In fact, they have been developing since the birth of the Digital Revolution in the mid-1970’s. Therein lies a key challenge to advancing digital transformation projects: many people treat digital transformation like it’s brand new. New things are scary, and risky, and it’s often easier to plod along with the status quo. Smart technologists will recognize that digital transformation has been around for a long time, and will use time-tested approaches to change management and project management to champion, implement, and measure digital transformation projects. Before fintech, there was financial technology; before the internet fueled our entire world, there were “Internet companies”; before digital transformation, there was, well, simply technological innovation that improved our businesses and made us smarter and faster–we must regain our perspective and get back to that simpler, more approachable view of digital transformation.
“Another key challenge is the difference in leadership approaches to digital transformation. Any technologist will tell you that technology is not the end–it is the means to an end. Too often, leaders do not think pragmatically enough about digital transformation. They focus on implementing new technologies (which is good), but often without clear cut goals (which is not good). Without understanding where you’re going, technology becomes yet another line item in the budget instead of all the things it should be: a tool; an instrument; a catalyst for change.”
At EquiLend, we lead by example for our clients: We align our technology goals with our business strategy by integrating our processes and initiatives to ensure that technologists and business people are working together. It is the only way to effectively use technology to create business outcomes, as opposed to using technology for its own sake. In doing this, we are able to create new operating models that automate and streamline traditionally manual processes. I could go on about examples of this over the last 20 years of EquiLend’s history: Our Next Generation Trading (NGT) platform that completely changed how counter-parties transact; our Securities Lending Markup Language (SLML) which brought standardized xml language to the industry; our entire post-trade suite that streamlined sec finance from end-to-end. The results are improved operational efficiency and unlocked scale that creates new business opportunities, products and solutions for our clients. Digital transformation is relevant from the back of an organization to the front, from data management and cybersecurity, all the way to how clients are able to change their own workflows, leveraging tech-forward, streamlined solutions.
Despite challenges, we are optimistic for the future. According to a BT Consulting Group report to which EquiLend contributed, firms engaged in sec lending are turning to technology to address their long-standing post-trade challenges (data; risk + regulatory; outdated technology). This is a key area of focus, as a recent study by Deloitte concluded that a standard blueprint for the entire post-trade lifecycle would significantly reduce inefficiencies. EquiLend’s technology has yielded considerable efficiencies for the industry. More than 1.6 million trades were made on our Next Generation Trading platform in July, automating trading processes that otherwise would have been done manually and taken hours. By utilizing cloud, AI and machine learning technology, we are helping industry leaders solve challenges to ensure scalability and resilience, yielding performance vital to industry growth.
The road to total digital transformation in sec finance has not been easy, and will continue to present challenges. But over the next 10 years, digital transformation will be the difference between firms that capture market share and thrive, and those that become part of history. We know that the evolution of technology continues at an unprecedented pace, and it’s time to act now to capitalize on this moment of opportunity.
Who We Are
EquiLend is a global financial technology, data and analytics firm offering Trading, Post-Trade, Data & Analytics, RegTech and Securities Finance Platform Solutions for the securities finance industry. EquiLend has offices in New York, New Jersey, Boston, Toronto, London, Dublin, India, Hong Kong and Tokyo and is regulated in jurisdictions around the globe.