Capital Markets in a Post-Covid World

Duncan Phillips, Chief Commercial Officer, Nivaura

This blog post is based on opening comments made by me during a webinar hosted by the London Stock Exchange on Friday 29th May 2020. The webinar was titled “No Going Back: Rethinking Financial Communications and Automation in a Post-COVID World” and featured a panel of representatives from Nivaura, Pushfor, novastone and Open Exchange. 

The Covid-19 pandemic has had a profound impact on both professional and personal lives around the world, and amidst the enormous cost to society and the risk of a resurgence in the virus, it is heartening to see steps being taken towards lifting the restrictions. 

As that happens, though, it is increasingly apparent we are likely not headed for a complete or immediate return to pre-Covid-19 life. Instead, it seems there are some aspects of the current paradigm that might remain. A recent YouGov poll, for example, indicated 85% of respondents want to see at least some of the personal or social changes they have experienced continue afterwards. This survey, and various anecdotal conversations, point to things like cleaner air, a greater sense of community, more contact with family, time to cook, and more outdoor exercise.

Similarly, businesses have been forced to find alternative ways to operate, and in doing so have reached a juncture at which many are reconsidering the effectiveness of traditional workflows and practices. 

One obvious example is business travel. With a multitude of cheap and easily accessible video call technologies, organizations can exercise more choice around how they cover their clients and win business. Ralph Sinclair, editor of Global Capital magazine, has asked whether the business of putting deals together really requires vast quantities of jet fuel and wasted hours at airports – what is lost in the form of conviviality, tradition and face-to-face discussions is offset by a better environment, greener credentials, and more time. All market participants, he argues, should use this opportunity to drive some real change in the way the market works.

Another aspect is work location. The idea that the office constitutes a necessary element of business productivity has clearly been challenged. Henry Mance, Chief Features Writer for the Financial Times, argues the default setting for professionals is no longer the four walls of an office, but the four sides of a screen. More accurately, though, it is modern software that allows this to be the case.

At the same time, concerns about remote working have dissipated. Employee productivity remains high, with many of clients talking about having the space to actually get things done. And for some, employee connectivity isn’t really worse than the practical realities of working in a large office where people rarely see everyone they work with. 

As a result, businesses around the world will now be assessing what their post-Covid-19 office portfolio could look like. For many, the need for large business continuity sites has clearly been called into question, but others are asking whether all employees even need a permanent desk. Twitter, Square and Facebook, for example, have all announced new policies allowing staff to permanently work from alternative locations, and other companies are likely to follow suit. In time, the office might become more about satisfying human need for interaction – a place to check-in, build team morale and handle more delicate conversations.

One public example of a company’s response to the crisis is the way in which Lloyd’s of London is shifting their business from a paper-based multi-party trading floor to a digitized platform, called PPL. This is part of a broader endeavour to explore new ways to do business more cheaply, and while there are reportedly mixed views and considerable trepidation, the effort is commendable. Interestingly, the platform they are leveraging was actually created in 2016 but saw limited take up at the time. During the pandemic, usage has jumped materially, with the ability to use the platform from home being a key driver. The key point is not that PPL is deemed to be a panacea to remote working, but rather it’s a starting point for the insurance market to reassess legacy practices and make their business more resilient. 

Elsewhere in financial markets there are similar challenges and opportunities. Some aspects of primary markets, for example, have workflows that have remained largely unchanged for 30 years. Recent transaction volumes, particularly among pragmatic corporate bond issuers, have been remarkable, and is testament to the resourcefulness of IT teams across the capital markets spectrum. 

But the reality is that many of the tools still used today in capital markets – email, chat, phone and documents – are generic solutions that lack cohesion and haven’t really kept pace with other industries. And if businesses aren’t headed back to the pre-Covid-19 normal, then that toolset is at risk of being quite outdated. 

Even technology that is designed to facilitate remote working – VPN or VDI for those in the trade – have their own issues. For example, rolling out such services involves a great deal of planning to ensure employees have the right hardware and training. Bandwidth issues can prevent the flow of large amounts of data and analytics, and, oftentimes, the actual system being accessed requires some optimization for remote working. But the biggest issue with most of these solutions is that they don’t ordinarily do anything to help an issuing client get back in the action.

As a result, banks and other market participants realise the answer is not to do more calls, send more emails and secure better internet connections, but to instead embrace the promise of modern digital services and web-based platforms that can help with client communication, workflow automation, data access and compliance. Indeed, the past 24 months has seen a rapid shift in pace within the industry, and an unprecedented ramp up in collaborations between established financial institutions and fintechs. And in that context, Nivaura is pleased to count many prominent capital markets institutions as shareholders, partners and clients.

As part of that broader industry collaboration, two themes emerge. First, firms are committing more resources to engaging with tech firms – whether through Digital or Innovation leads, ventures arms, or tech champions embedded within the businesses. Second, firms are recognising that technology has a role to play in both enhancing parts of the business that are service differentiators and managing costs in parts of the business that are not.

In the coming months we’ll be expanding on these themes and look forward to sharing our thoughts. In the meantime, Nivaura is focused on helping our clients build a digital future for capital markets and representing a broader wave of new fintech businesses helping the market modernise.