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Back to Basics – The Fundamental Approach for Digitising Capital Markets

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By Scott Eaton, CEO, Nivaura.

News cycles in capital markets are fixated on the automation of the fixed-income market. The focus is almost exclusively focused on the secondary market as major market participants are both evolving their own offering while simultaneously swatting off the competitors that are kicking the evolution into high-gear. AI, machine-learning, smart-data, blockchain, DLT, the list of new ‘transformative’ technologies is endless and each of them and the companies that are utilising them seem to be attempting to solve the same problem in a different way. It is important to strip back the market when addressing what needs to change to drastically drive automation and adoption and workflows is where this begins.

Within the capital markets space, the pandemic, and the fragmentation caused as a result of it, should have forced more automation, but the reality is that many of the tools still used today – email, messaging, phone and documents – are generic solutions that lack cohesion and haven’t kept pace with other industries. And if businesses are considering heading back to the pre-pandemic normal, then that toolset is at risk of being quite outdated.

Even technology that is designed to facilitate remote working have their own issues. For example, rolling out such services involves a great deal of planning to ensure employees have the right facilities, training, connectivity etc. Bandwidth issues can prevent the flow of large amounts of data and analytics, and, oftentimes, the actual system being accessed requires some optimization for remote working. But the biggest issue with most of these solutions is that they don’t ordinarily do anything to help an issuing client get back in the action. In the capital markets this could potentially spell disaster and at the very least huge drains on resources both personnel and financial.

As a result, banks and other market participants realise the answer is not to do more calls, send more emails and secure better internet connections, but to instead embrace the promise of modern digital services and web-based platforms that can help with client communication, workflow automation, data access and compliance. Indeed, the events of the last two years, combined with the market turmoil we now find ourselves in, has seen a rapid shift in pace within the industry, and an exponential increase in collaborations between established financial institutions and fintechs. Given this, Nivaura is pleased to count many prominent capital markets institutions as shareholders, partners and clients.

As part of the market collaboration we are witnessing, two key themes have emerged as the driver of activity. First, traditional financial services are committing more resources to engaging with technology entrepreneurs and firms – whether through Digital or Innovation leads, investment, or tech proponents who are embedded within the businesses. Secondly, firms are recognising that technology has a role to play in both enhancing and developing parts of the business that are service differentiators and managing costs in parts of the business that are not. This is something we have focused on at Nivaura during this period.

As an example of this focus, in early 2022, in partnership with other UK fintechs, we successfully conducted a proof of concept showcasing the benefits of Distributed Ledger Technology (DLT) in offering near-instant settlement in capital markets and payments – the first cross-chain pilot debt transaction on public Ethereum and Fnality Payment System. In what has traditionally been an incredibly labour intensive and costly process – collaboration across different parties to simplify these processes is what will deliver true efficiency to the capital markets. Moreover, we believe that the exercise with Fnality also highlighted the need for an approach which embraced both the more traditional workflow, but modernized for the digital age, as well as showing that such technologies can be melded together with the latest cutting edge approach such as DLT.

Technology companies and visionaries in the UK are committed to working with participants across the industry to harness the potential of the technologies mentioned at the beginning of this piece. Offering traditional market participants a solution that efficiently interoperates with current ways of work and innovative technologies will be the catalyst to push parties over the edge and into wider, full-scale adoption of digitised solutions.

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