Digitization has transformed almost all industries and now it has taken over capital markets also. Capital market industry is highly dependent on valuable data. Compared to other financial services, the degree of digitization in this industry is slow. However, digitization with the assistance of data conversion service in the capital market industry has helped with day-to-day operations to improve efficiency, reduce costs and pass on the benefits to customers.
Digitization of Securities
Earlier, traditional finance did not go through massive disruptive changes, and industry players needed to find innovative approaches to scale. However, asset digitalization aka tokenization creates a whole new user experience. Digitizing an asset and using a smart contract helps the share owners to sell shares of private securities on compliant exchanges on demand and not suffer from their money being locked up in funds for years.
Digitization has transformed the investment landscape in various ways:
- Information revolution: By digitizing and analyzing financial data investors can understand the significance of investing and financial planning. You can invest at the right place and make informed decisions after comparing options.
- E-wallet: By digitizing your personal financial data you can link your bank details to the e-wallet and this enables quick transfer of money. It also allows trading and investing in stocks and bonds easily.
- Accessibility through mobile: In this present digital world smartphones have become our most important gadget. In an endeavour to digitize, various mobile applications became available for easy payments, from monthly bills to bank transactions, or for investing in financial instruments like Mutual Funds, ELSS, Fixed deposits or even pension plans.
Digitization Drives Value In Securities
With digitization, assets owners and managers are now at a turning point. All aspects of the investment industry are being driven by digitization, and this is creating new value for investors and their asset managers.
Emergence of New Business Models
According to Justin Chapman, Global Head of Market Advocacy & Innovation Research at Northern Trust there is a different viewpoint as regards the rising digitization in the capital market. After the 2007-08 financial crisis, the focus was more on supporting the industry’s infrastructure, to ensure that it was safe and sustainable, standardized, efficient, and better regulated. The arrival of new technology opens the doors to more opportunities for industries. New technologies like AI, big data, cloud computing and Blockchain became more apparent and the next step was exploring the uses of these new technologies in new business models. Digitizing helps to reinvent new business models and also provides new opportunities and values.
Blockchain has the potential to change how the issuance of securities is captured. The multiple intermediaries that were used earlier can be now streamlined with fewer actors in the value chain together with real-time, immutable data in a digital environment. This innovative technology has shifted the industry towards being more investor centric.
Better Efficiency by Filling Gaps
Technology helps to fill investment landscape gaps. Investors found that the transparency and efficiency of the PE market didn’t measure up to what they were accustomed to in public markets. To address this challenge, Northern Trust teamed with IBM and others to develop a blockchain-based private equity ecosystem. This real-time insight and transparency to all parties, including the fund managers and investors, as well as allowing regulatory access when required also support compliance, with regulators kept in the loop during the development process. Exchanges are also creating digital platforms for the issuance of securities. There are other developments also that include digital solutions for fractional ownership of fixed income bonds, broadening investor access. In some cases, the investment product itself is a result of digitization, like bond-i, a debt instrument issued by the World Bank, and the first bond to be issued on a blockchain.
Associating with a data conversion company can speed up your digitization process and improve efficiency and business value.
