The New Technology Needs of Financial Services Companies
Now that the majority of financial services companies believe the banking crisis of 2008 is over, the post-crisis rebuilding is underway. Many Financial Services companies are in the same or worse predicament as other sectors and businesses as far as the technology used in their enterprises. Their entire infrastructure of computers, hardware, communications, software, and integration of IT are all severely outdated or aging and insufficient to meet the demands of the "new reality" of heavily regulated financial markets.
This provides a focus for investors and traders as the financial markets tend to lead in the early adoption of new technologies. Understanding what new technologies the financial markets are embracing can provide a useful tool for selecting stocks to trade.
There are many issues facing financial services firms as they grapple with the new reality of a tightly monitored, regulated environment. For many of the younger financial services individuals, this reality is a shocking change to what they experienced before the crisis.
Cloud computing and the Internet of Everything are areas in which technical traders need to become well versed and educated so that they can take advantage of the investing opportunities that are unfolding as regulations settle in and the entire financial services industry and banking industry get on with the task of rebuilding their companies and expanding their businesses.
The new regulations and huge compliance issues are changing how the financial services approach and use technology, computers, software, infrastructure requirements, and communications networks. This is opening a mega opportunity for the vendors that cater to the financial services industry in these various sectors of technology.
Here are the primary areas that are seeing huge interest and potential growth for technology firms due to the growing demand from financial services companies.
The financial services companies are divided into three primary groups for new technology purchases.
1. Buy Side Institutions
The Buy Side has been forced to become more independent and less reliant upon the Sell Side for services, trading tools, strategies, platforms, and implementation of trading activity. This has led to more demand for Managed Services for this group of giant and large mutual and pension funds. BPaaS, Business Process As A Service, BPO, Business Process Outsourcing, and Cloud service hosting, all are expected to have significant increases in the next 12-18 months as the giant funds adopt and adapt to the regulatory compliance requirements as well as their tighter budgets overall.
2. Sell Side Institutions
Sell Side Institutions, which include big investment banks, money center banks, and financial services companies who all create trading instruments and financial products, are facing the most stringent of all the compliance regulations and the heaviest burden of costs to implement, secure, and maintain a far more sophisticated system of risk management, risk assessment, and overall documentation. These firms are buying technology that can streamline the processes of recording and securing vast amounts of data while lowering overall costs, as this group is in a contraction phase.
3. Smaller Funds
Smaller also are required to have full risk assessment models, complete documentation and must be in full compliance. These smaller companies are going to be forced to adopt more Cloud computer services as well as hosting and Business Processing Outsourcing.
The massive amount of Market Data that most now be documented, stored, and secured is another huge area for new technology companies and their stocks.
The Financial Services Industry, like many other industries, is facing the challenge of tighter budgets with more computing demands. That is forcing companies, large and small, to move more rapidly to Cloud technology, as well as other new technology solutions. PC computers are well past retirement and the entire financial community is now at a crossroads where maintaining the outdated equipment is far more costly than switching to the new Cloud-based technology.
Invest with Knowledge,
Martha Stokes CMT
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