A research by McKinsey & Company has revealed the financial technology innovators have conspicuously made in-roads into the capital markets. The report titled Fintech Decoded: Capturing the opportunity in capital markets infrastructure revealed that the fintech growth has far outstripped other areas of financial services. Thus, rising by 277% against an increase of 186% and 184% in corporate banking and payments respectively. However, this huge rise is largely attributed to the small base.
Based on in-person interviews, information from McKinsey’s Panorama fintech database, and the survey of 46 members of World Federation of Exchanges, the report underlines that the incumbents in the capital markets take Fintech as potential partners not as disruptors.
The report stated, “Fintech in the capital markets has lagged its counterparts elsewhere in finance, and in some areas the technologies and benefits seem far off. But the level of investment in CMI fintech is gaining, to the benefit of the early movers.”
As the capital market institutions disburse most of their expenditure on recurring operational expenses, it is therefore more feasible to invest in fintech firms directly than to develop the unique capability in-house. With CMI having 700 active fintech firms, the CMI can take advantage of the Fintech firms by furnishing the strategy and then specifying the areas of mutual cooperation.
However, the main focus area of the Fintech firms is retail banking and payments. The areas that are well-known by the common people.
However, the report noted that the CMI landscape is much more complex than retail banking. It is complex due to the presence of other structures such as clearing houses, CSDs, local and global custodians and transfer agents.
According to the leading industry expert, the investments in Fintech and the partnerships must be chosen with due diligence. Thus according to him, fintech by its self is not a strategy but a means to reach the strategy.