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Investment banking industry

An Overview of the Top Investment Banking Industry Challenges

The investment banking industry is on a new wave of change and transformation. As the financial services sector is still recovering from the global economic crisis, investment banking companies in the US are still struggling to regain their former levels of profitability. As a result, several major players in the US investment banking industry have announced their plans to move from traditional underwriting business to other activities including mergers, acquisitions advisory, and fundraising. This change has been largely fueled by recent regulatory changes that have made some investment banking activities more expensive than the others. Furthermore, the rising need for sophisticated in-house applications, innovative customer-facing portals, and higher transparency and security across the board mean that companies in the investment banking industry are faced with substantial pressure on all fronts. This blog covers some of the major challenges facing companies in the investment banking industry right now.

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Investment banking industry challenges

Investment banking industryRoadblocks in cost reduction efforts

Companies in the investment banking industry have been constantly pursuing strategies to achieve sustainable cost efficiency. However, several factors including declining revenues, excessive costs, and developments in digital and regulatory pressure have increased challenges for investment banking companies in the US, making it incredibly difficult to achieve cost reductions. Leaders in the investment banking industry who are seeking sustainable cost reductions should strive to strike a balance between optimizing the existing core activities while investing in new engagements.

Enhancing client experience

Customer-centric experiences in B2C business models are shaping client expectations in the B2B realm as well. As a result, investment banking industry companies are finding it difficult to meet these changing client demands and expectations. Investment banking companies can begin by assessing the existing client experience and mapping out the client experience standards that they want to deliver to identify necessary changes that could be made to their delivery channels and feedback and monitoring mechanisms.

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Cybersecurity

Cyber-threats are rising at an unprecedented rate and legacy technology have become a risk factor. They are more prone to unpatched vulnerabilities and create compatibility issues in M&A situations. Furthermore, there were several mergers and acquisitions in the recent times as banks sought to consolidate their protection under the law. But often the legacy infrastructure acquired by a bank through M&A activity is not up-to-date and features extensive vulnerabilities that create additional fire-fighting challenges for IT teams of companies in the investment banking industry.

Talent acquisition

Companies in the investment banking industry are still struggling to retain top talent despite introducing new measures such as faster promotions in a bid to attract employees. One of the prime reasons for this is that young professionals are finding themselves more drawn to alternative sectors such as technology or innovative start-ups. Moreover, the fact that the lifestyle of an investment banker is typically associated with long hours and tight deadlines is also part of this permanent trend. Investment banking companies must identify effective ways to attract and retain talent in their organization.

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Commercial Banking Trends

Trend Watch: Top Commercial Banking Trends 2019

Currently, there is intense competition for the wallet share in the commercial banking sector. This is primarily because unlike retail banks that rely on a single firm to handle financial needs, corporate clients often maintain relationships with several banks. Moreover, the expectations of commercial banking customers are unprecedently high due to which innovators such as fintech are threatening to grab the most profitable commercial banking segments. This makes it imperative for players in this sector to be on par with all the latest commercial banking trends and enhance the way they serve clients. Several forward-thinking players in the commercial banking space have already begun adopt key commercial banking trends and integrate their systems with that of their clients in order to extract deep customer insights. The key to remaining competitive for commercial banking companies is to be cognizant of developments internally and externally.

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Commercial banking trends 2019

Commercial Banking TrendsBolstering customer experience with digital transformation

Banks make more profits from corporate customers when compared to retail customers. However, many commercial banks have failed to upgrade their archaic legacy systems and manually-intensive processes. Digital disruptions are slowing making their way into the commercial banking sector. Taking cue from the retail sectors, top companies in the commercial banking industry are investing in digital transformations to facilitate exceptional customer experiences. This is one of the biggest commercial banking trends right now that would propagate better customer experiences for commercial banking companies.

Collaborations to interlink value chains

When compared to retail banking, the commercial banking sector is relatively behind in terms of digital revolution. Corporate customers expect their banks to provide facilities such as real-time access to banking services. To make this a reality, commercial banking companies are looking at options to collaborate with these corporations and interlink their value chains. Such commercial banking trends will see rapid growth this year with several players already starting to develop customized solutions that can connect directly to consumers.

Innovation and disruption will not only transform how established commercial banks need to service their clients, but it will also evolve what clients come to expect. Get in touch with our experts to know how Infiniti helps banking sector clients stay updated on the latest commerical banking trends.

The rise in the use of AI

There has been a considerable rise in the amount of structured data collected by banks over the last few years. The use of both structured and unstructured data has been driving strategic and operational business decisions. As a result, the use of machine learning and artificial intelligence capabilities are becoming the most sought after commercial banking trends. These capabilities would help commercial banking companies to provide superior customer experience and minimize pain points for corporate clients.

Gain more insights on commercial banking trends and learn more about Infiniti’s solutions for the commercial banking sector.

Pricing strategies

Banking Industry Price Analysis: Identifying innovative pricing opportunities for a retail banking Client

Although modern banking companies have invested heavily in efforts to improve customer experience, most of them tend to overlook ways to innovate their pricing strategies using effective banking industry price analysis solutions. Banking sector companies generally react to the changing regulations on product structures by modifying their pricing tactics to emphasize more on costs and risks. Meanwhile, several other sectors including airlines, ride-sharing services, hotels, and digital media continue to experiment with innovative pricing strategies, and their customers seem to have accepted the new pricing schemes with little resistance. Over the past couple of years, a few players in retail banking have made strategic pricing a core discipline and have consequently established a dominant presence in the industry.

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Business challenge

The client is a renowned retail banking company based in Central Europe. Despite the banking sector slowdown in Central Europe during the 2008-09 global financial crisis, the sector is gradually benefitting from strengthened regulations and growing market opportunities. The client was facing predicaments in identifying customer needs and keeping up with the changing customer expectations in the retail banking sector. Furthermore, they wanted to fix the misalignments in their existing pricing strategy. With the help of Infiniti’s banking industry price analysis, the client also sought to optimize pricing innovations and boost promotional activities in order to attract the millennial crowd.

Pricing for products of services in a highly competitive market could prove to a highly challenging task. Get in touch with our analysts to know how our pricing solutions can help you risk-proof your pricing decisions.

Importance of banking industry price analysis

banking industry price analysis

Solutions offered

The experts at Infiniti Research followed a three-phased approach to banking industry price analysis. The first phase of the banking industry price analysis solution involved identifying the target customers and grouping them into various sub-segments. The second phase of the banking industry price analysis included understanding the needs of different retail banking customer groups and pinpointing the gaps in fulfilling their expectations. The final phase of the banking industry price analysis involved a comprehensive study on different innovative pricing strategies followed by retail banks in the central European market as well as those of prominent retail banks in other countries and shortlisting the most attractive and feasible ones for the client.

By leveraging Infiniti’s banking industry price analysis, the retail banking client was able to categorize different customer groups and create targeted promotions for each of these segments. They were able to understand where they fell behind in terms of their existing pricing strategies and more attractively align the prices of existing products and services. Using the banking industry price analysis, the retail banking company was also able to implement promotional activities such as cashback rewards to attract younger consumers.

Learn more about Infiniti’s banking industry price analysis solution

retail banking

Category Scan: Retail Banking Market Updates and Future Trends

The retail banking industry is undergoing a wave of change. To lead the change, it is essential for retail banking companies to choose the right business strategy. Experts at Infiniti Research have engaged in discussions and surveys with top global banking leaders and several retail banking customers to gauge their opinion on the changing retail banking landscape and gain a better understanding on the upcoming trends in this sector. A fair majority of the prospects who engaged in this discussion agreed that technology is rapidly morphing from an expensive challenge into a potent enabler of better customer experience and effective operations. Despite this, attracting new customers is one of the biggest challenges facing retail banking companies today.

The article below scans the category for retail banking services in its entirety to help companies and customers in the sector to understand and stay abreast of the latest news, innovations, and market developments.

Retail Banking: Recent Innovations and Market Updates 2019

retail bankingPersonalization is the new normal

Personalization is gradually becoming a primary mechanism for retail banking companies to enhance their customer satisfaction as well as to increase their economic value. Customer retention is often seen to be higher at banks that understand customers’ financial needs and interact with them in ways that reflect their preferences. In an era of hyper-personalization and competitive pressure, retail banking customers expect meaningful insight and advice-on-demand from their retail banking partners apart from the speed and convenience of transactions.

Personalization is impossible unless you deep-dive into customer data and gain a clear understanding about your target customers. Request a free brochure to know how our customer intelligence solutions can help your business achieve this

More local markets may close for outsiders

Traditionally restricted markets including China, India, and Korea will be joined by others in the case of restricting market share for foreign institutions through local regulation and subtle preferences wherein domestic institutions are more favored. Consequently, the ability of emerging market financial institutions to penetrate markets outside of their home countries will become limited. This can only be avoided in case the regional and bilateral trade agreements concluded over the next five years drives select opportunities for certain institutions where financial services are included in the scope of the agreements.

Branch banking will undergo significant transformation

As technology enables every aspect of online retail banking, reducing the usage of hard cash, traditional branches are slowly losing their importance. Given their high-fixed cost, branches will need to become increasingly productive, or significantly less costly. Several retail banking companies have already begun cutting down on staffing, closing the most unproductive branches, and have started experimenting with new branch concepts. These trends are expected to accelerate as customer demands and expectations evolve. However, we do not expect branches to face a full shutdown, rather they may continue to function as centers for flagship information, advisory and engagement hubs, and provide smart kiosks that offer service, sales, cash, and video contact with a range of specialists. The branch size and costs will be reduced by introducing new models and migrating transactions to low-touch digital channels. Although the human touch will always be available, digital channels are expected to dominate the future of retail banking sector.

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Cybersecurity will be paramount

Recent cases of high-profile data breaches have generated fear and uncertainty among retail banking customers, prompting retail banking companies to undertake strict measures to curb such incidents. As the regulation over cybersecurity is rising, banking companies will need to do more in terms of intervening and keep pace with the constantly growing and changing cyber threats. It is expected that by 2020 leading banks will have developed advanced cyber-security strategies that are more aligned with their business aims, risk-management protocols, and regulatory requirements. Since many banks lack the capabilities and resources to tackle these issues on their own, such companies will partner with third parties to leverage such strategies.             

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IPTV Service

Industry Best Practices for Investment Banking Companies

Investment banking companies have faced several challenges over the last few years. The new regulations after the financial crisis have brought in several changes and have made it slightly difficult for the investment banking companies to earn profits from numerous traditional lines of business by creating funding, onerous capital, and requirements for liquidity and raisContact USed complexity and operational costs. Simultaneously, technological advancements have modified client interaction models, execution platforms, and the process of operations. The strategy for growth varies from one bank to another but all investment banks need to restructure and reposition their strategies if they are aiming at sustainable growth and profitability in the current scenario. Here is the list of four best practices for investment banking companies that must be followed:

Structuring Strategic Coherence

Strategic coherence is a chief component of success for any investment banking company. By strategic coherence, we mean the proper alignment of products, services, and capabilities with one clear way to play. This is one of the best practices that is a must follow for any investment banking company. Investment banks need to keep regulatory considerations and capital efficiency notions in mind.

Shifting to strategic optimization

There is a need to invest extensively in the optimization of strategy for the investment banking companies. This requires analyzing the most efficient and effective ways to enhance performance considering all performance factors like the franchise and operational synergies along with financial and other constraints.Ask An Analyst_IR

Re-examine client profitability

Investment banks have typically been less focused than purely consumer-oriented companies when it comes to examining their customers’ profitability and using client segmentation strategies to analyze which activities are creating or degrading value. A client-centric approach to profitability is one of the best practices to evaluate the effect of the external macro forces. These external factors include market structure changes, counterparty behavioral changes, and pressure of regulations that have been compressing revenues and increasing the cost of business.

Concentrating on change execution

It is very important for the investment banks to make the right selection of leaders and team personnel, define goals and expectations, and build up momentum for change. This is counted as one of the best practices in investment banking.Get More Info

Functions of Investment Banking

  • Investment banks act as an intermediary between investors and issuers
  • It facilitates financial, strategic, and valuation of advisory services
  • Securities, debts, and private equity help investment banking companies to raise capital
  • It acts as an advisor to companies in their mergers and acquisitions and restructuring transactions
  • Investment banks provide special services and products to the government and corporate clients
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