Celent agrees, stating in a recent report: “Never before has creating information, and insight from data been more important. The banks that survive and win in the changing FICC world will leverage their access to detailed insights into their clients and relationship with their clients. These data insights must come from a detailed perspective of customer engagement, liquidity venues and market protocols. These banks will know their exact regulatory and capital costs, and a full perspective on the economics of each trade.”
Oliver Wyman goes further and adds: “The role of sales teams will shift over the next five years as banks develop smarter approaches to leveraging the wealth of data available to them. Automated data feeds will allow for increased loading of the salesforce, smarter allocation of resources and targeted trade ideas. Against a backdrop of increasingly automated execution through electronic platforms, this should lead to fundamental changes in sales strategy and costs.”
It adds: “More reliable information flows within banks, as well as robust analytical techniques, are needed to unlock the value of client information. Once this is accomplished, banks can assess client level economics and buying behaviour in order to allocate resources more effectively. There is significant scope for upside here: when we look across individual clients and sub-segments, we see stark differences in the relative attractiveness across sub-groups of clients. Importantly, this is not necessarily the same for all banks, as it depends on each bank’s areas of strength and financial constraints. For example, specialist funds typically require relatively high sales/coverage costs and more risk capital, but tend to have less need for leverage-intensive product structures.”
The role of data analytics has evolved significantly to meet this need, moving from the field of Big Data to innovative products that give banks an enterprise-wide view of data and enable them to derive meaning from it. Those financial institutions that provide employees with granular and precise short cuts to informed market decision-making and action will be the long run winners.
This new generation of data analytics technology is in the early stages of deployment across the industry, but is already set to transform financial markets and could act as a key differentiator in performance. Access to this type of business intelligence enables FICC businesses to respond proactively and in the best interests of their clients, rather than being reactive.
Banks now need to move beyond descriptive analytics and into the field of prioritised action and predictive analytics based on historical patterns. Research from Harvard recently indicated that by 2017, firms using predicative analytics will be 20% more profitable than those without. Predictive analytics enable institutions to leverage the underlying patterns to direct front-line employees into targeted opportunity. For a FICC business, this could provide answers to previously unanswerable questions such as: which clients am I anticipating seeing in the market today? What products do I think clients will most likely be trading?