During my career in DCM, the conventional areas of differentiation and competition were hiring top talent, fostering the right culture and leveraging the bank’s broader resources (e.g. lending book, markets services, credentials).
The formula was the same when I started and finished, ten years on. However in recent times there is a new (and growing) battleground in DCM, which is digitalisation.
At a high-level, from an employee perspective, investment in digitalisation might not seem like such a differentiator given most banks by now have a well thought out digitalisation plan and significant resources deployed in this direction. The ECB’s 2023 bank digitalisation survey of 110 banks found that on average 2.8% of operating incomes were allocated to digital transformation and 5.2% of their workforces.
The anecdotal feedback (we’ve had) is the same, that everyone has got some technology use case they feel good about and the future of banking digitalisation is bright.
Another notable conclusion of the survey was that the focuses are so diverse: cyber risk mitigation, customer retention, trading advantages, operational efficiency, compliance. It’s like the old adage, give ten developers a problem and you’ll get eleven solutions.
So there is a noticeable difference between bank tech-stacks and it’s probably one of the most standout differences if you switch employers, but it’s not a case of better or worse, rather what’s the focus.
Having said that, when it comes to DCM-specific tech the cross-bank variance is significant. By now, some banks are using five or six DCM-specific tech solutions which are fully adopted, whilst others have none and no near-term prospect of any.
Already today, we hear of bankers joining new firms whose first questions are about which platforms are used to achieve different parts of the DCM workflow.
Whether DCM is represented on the bank’s tech agenda, from our experience, is down to a few factors.
Firstly, is the digital transformation strategy agnostic between projects. Is management of the Investment Banking team invited to submit use cases for technology. To date the Markets and Consumer Banking functions are way overserved versus Investment Banking. It can be easier to claim resources based on the argument, say, that regulatory breaches need to be addressed more urgently than anything else.
Second, having a properly resourced, Investment Banking-specific, innovation team. There are so many steps involved to get new technology authorised that it requires dedicated team. The existence of an empowered IB-specific innovation team helps DCM follow through with acquiring new tech resources.
Third, having experienced and confident leadership in the IT team. With every digital tool a bank considers investing in, there is a build versus buy decision. Building your own comes with a guarantee of customisability, but buying from a third party means that it will be available (and work) immediately. Everything is buildable and you won’t know all the requirements at the beginning, so ruling out an in-house build is tricky. It takes an experienced and confident IT team to make the right call and avoid decision paralysis.
Moreover, that’s not to say that without these it’s impossible to make progress digitalising DCM. There are DCM franchises that carve-out digital transformation funding from their own budget and ones where tech projects are dragged over the finish line by tech-hobbyist within the DCM team. Nevertheless, it is harder.
In the meantime, the DCM teams gaining ground in this area of digitalisation are using their resources more efficiently, producing richer content to share with clients, and their employees feel like their bank is beating the competition in this area. If you’d like to know about out digitalisation in the DCM space, reach out to us on linked in!