The point of making predictions is not to be right, but to be ready. So with that purpose in mind, what might technology have in store for financial markets in 2017?
The big four underlying trends
One prediction we can make with some confidence is that several long term underlying trends are maturing and will manifestly change the way we work.
1. Digitisation – Financial markets were first movers and are the longest running players in the transition to digital services and processes. Meta business drivers – the pressure to eradicate costs, standardise processes, reduce variables,
reshape the business to run more efficiently – will make digitisation even more urgent in the coming year.
2. Security – The security challenge is much wider than cybersecurity alone. We're beginning to see new ways of thinking about the problem, such as President Obama's idea that security threats are like a virus and you can use medicine constructs
to deal with them. Looking ahead, we'll benefit from more intelligent networks that are literally 'security aware', able to independently detect and deal with vulnerabilities, and alert adjacent networks.
3. Cloud – No longer do financial institutions automatically reject the cloud on the grounds of performance, cost or security, thanks, in large part, to the regulating bodies. In July 2016, the FCA gave its blessing to the use of cloud computing
in UK financial services.
An important related trend is the emergence of specialist cloud ecosystems as cloud providers recognise that in order to differentiate they must have the right partners embedded in their cloud. For example, 2016 saw Google attract Symphony
away from Amazon. Next year we expect to see more cloud providers take similar steps to attract new partners to their communities.
4. Big data – Big data and the ability to analyse it is becoming incredibly important. New data analysis tools can be applied to all sorts of data sets. To quote one example, the analyst Nate Silver of FiveThirtyEight.com used sophisticated
analytical tools and multiples data sources to forecast the outcome of the US presidential election, giving Donald Trump a 30 per cent chance of winning – way out of sync with more conventional polling, but much more accurate. Potential applications for financial
markets will include the development of 'robo advisors', better personalisation and more intelligent strategising.
So, with the big four trends in mind, which newer technologies will gather momentum in 2017?
1. Fintech 2.0. We're at a point where we can distinguish between where fintech was and where it is going. Fintech is maturing into Fintech 2.0. Increasingly, fintech will not go it alone but collaborate, complement and be enabled through
existing institutions. There is a lot of institutional investment to facilitate fintech innovation and enable better working together. Regulators are also lowering the barriers fintech needs to cross to work in the industry. However, there are still many spaces
where very smart fintech is needed, where industry disruption is possible.
2. Intelligent networking. The virtualisation of network functions will allow Chief Information Officers (CIOs) to connect more sensors, access more data, undertake better analytics and respond with more agility to major events. But the
real advantage is that the network really will be smarter. For example, an intelligent network will be security aware; it will detect that it is under attack, be able to identify/neutralise the threat and alert other networks. Aligned with software defined
networking (SDN), network function virtualisation (NFV) is very powerful
3. Distributed ledger and blockchain technologies will start to get real in 2017. In the first half of the year they'll probably still be in the prototype/proof of concept stage. But by the second half of 2017 we could see genuine use cases
emerge, with real production capabilities and real applications.
4. In 2017 financial markets will increasingly see technology as a solution to regulation. Indeed, the volume, precision and certainty with which financial institutions need to comply will drive us down that path.
My final prediction is not a technology but a way of working: precision. We're going to get more precise. Because of the advances in IT processing power and cloud storage, we're going to be able to handle massive quantities of data, often
in real time. We'll be able to use the insights gained for more personalisation, greater sensitivity, refinement and a better performance in everything we do. And who knows, as we develop more precise thinking and understanding, we might even find we can predict
the future with more certainty?