Knowing – and Making – The Difference in Capital Markets
Guest posting for Sinan Baskan, Vice President, Capital Markets, Global Banking IBU – SAP
Capital markets – where high risk, high return and high frequency trading drive technical requirements – are early adopters for new technologies.
In banking, it has traditionally been possible to develop a product – a mortgage product or new type of savings account – and then deploy it to customers, and expect that product to continue to serve its purpose for years to come. In capital markets, new product development cycles are far more volatile, with shorter life spans.
Adjusting to a fast-moving world
One of the consequences of the financial crisis for retail and commercial banking has been the need to be even more responsive and agile to market demand and regulatory changes. With pressure on margins and restrictions on capital, it is essential to succeed in the competition for high value customers by analysing their needs and creating customised offerings.
In capital markets, this is already a familiar story. Relative to retail banking, capital markets institutions have always dealt with high risk, high return and, increasingly, high frequency in the past, well thought-out strategies have been rendered inoperable by shifts and volatility in the markets.
Designing for change
One of the key themes of banking technology development is standardisation – the move from custom code running on legacy systems to standard software running on standard hardware – allowing banks to focus their efforts on establishing competitive differentiation.
In order to create a constant supply of new products for sale in a world with short and shortening business cycles, customisation and agility are vital. And this is where having a unified technology base provides vital competitive advantage.
A common architecture, supported by an extensive and powerful toolset, reduces the amount of new labour required to create every new product. A common toolset also makes it easier to alter and ultimately replace that product to respond to a changing market – the same platform can be used for extensive in-house innovation.
The physical infrastructure of capital markets is also changing – faster processing of more information is required to follow faster-moving and more complex markets. Faster processors and in-memory processing have introduced revolutionary increases in speed wherever in banking they have been deployed. With support from SAP, a global top 10 investment bank was able to cut its query time from 2 hours to 1 second. This represents a $417,000 saving in data management costs. However, the potential benefits – in terms of understanding and being able to react to situations more quickly and being able to produce fast and accurate data for risk and regulatory purposes – may far exceed that.
Future success in capital markets depends on the ability to apply rich toolsets and design intelligence to model products and solutions
able to adapt to and profit from rapid change.
If you would like to learn more about how SAP’s design-led approach to capital markets is helping institutions to change faster, for the better, our site contains case studies and further information. Or ask a question or share your thoughts in the comments to this blog post, or on Twitter at @Sapforbanking.
To learn more about how we can help you with your business challenges please have a look at SAP’s Solution Explorer for the Banking Industry.
– Sinan Baskan, Vice President, Capital Markets, Global Banking IBU – SAP