A Glance at Digital Transformation in Banking 5.0

A Decreased Money Flow from Government to Investment Banks Likely

Exactly 80-percent of JPMorgan Chase’s customers favored managing their money digitally, and 54-percent of the same survey sample reported using more digital banking than they had before COVID-19.
Thus introducing AI to replace entire jobs or augmenting parts of them is a huge undertaking for businesses, especially the large ones, and investment banks are no exception. According to Banking 5.0, financial institutions can adopt either a stepwise, big bang, or emergent technological transformation. Ultimately, the end goal is to bridge the gap of the consumer-decision journey (CDJ) digitally with the focus shifting away from traditional banking methods.

Therefore, the investment bank’s increasing need of AI solutions coinciding with the speculated lower commissions they sustain in the future is pressuring banks to evolve.

One form of lower commissions for investment banks comes from the reestablishing of Sustainable Development Goals (SDGs) — to which the United States is subscribed since 2015 — that are refitting to the paradigm of COVID-19 and its economically grave implications. Due to growing fears of an increase in poverty, hunger, untenable debt, and austerity in the Least Developed Countries (LDCs), the pressure is on the world’s leading contributor in SDG funding, the United States, to weigh meeting global (voluntary) contributions against investing in its own domestic recovery and growth, which could mean added stress on government bonds that an investment bank buys before it resells them on the exchange.

In addition, much of the focus is shifting away from bank funding for sustainable growth and towards a more direct, communal funding approach in an effort to innovate ways of eradicating homelessness in a number of America’s states by 2030. This means a varied trend in tax reform is sure to mark America’s economic conversation throughout the decade, further insecurity surrounding government securities on the exchange, and investment banks reaping less in commissions on government bonds.

Banking 5.0: The Investment Bank’s Digital Transformation

Digital transformation is not simply the capacity for a bank’s innovative decisions. Digital transformation always called for a reorganization of corporate structure, culture and a drastic change in the processing of information channels, as well as the business models that use them in the best and most efficient ways technology will allow in their marketing, distribution, AI advancements, and data solutions efforts.
COVID-19 gave everyone in the corporate world a jolt of realization that involves necessitating a fundamental transition. In the Digital Transformation Architecture section of “Business Model Philosophy in Banking 5.0”, the author strongly urges that, “This [transitional] process must cover every aspect of the organization, from the organization chart to the corporate culture, from the business model to the leadership style, starting with the financial institution’s vision and culture [. . .]” (Nicoletti)

What AI Means for the Investment Bank’s Business Model

This enormous shift accounts for much of the real pressure that investment banks — and indeed all banks — face. But, investment banks have the advantage of cutting deals with customers that are more business-oriented, such as entrepreneurs and the government. Moreover, such customers are already attuned to technological banking implementations than the typical homeowner. And their model shift ought to reflect this by leaning more heavily on the logistics of conducting business-to-business transactions in their marketing messages, newly formed platform solutions, resulting commission appraisals, and advertising of new approaches to risk assessment (See Fig. 2).

Since the costs that investment banks charge are variable more readily according to shifts on the exchange market, offering competitive prices against a milieu of neighboring investment banks that will thrive in a post-COVID-19 world highlights the need for large, mid- and small investment banks to transform.

References

1. Mollerus, Rolland. United Nations, 2021, The Least Developed Country: 2021 Country Snapshots, www.un.org/development/desa/dpad/least-developed-country-category/ldcs-at-a-glance.html. Accessed 29 July 2021.

2. “UNSDG: Where the Funds Are Coming From.” United Nations, United Nations Sustainable Development Group, 2021, unsdg.un.org/SPTF/where-the-funds-are-coming-from.

3. Pipa, Anthony F., and Kaysie Brown. “American Leadership on the Sustainable Development Goals.” Brookings, The Brookings Institution, 20 Oct. 2020, www.brookings.edu/blog/up-front/2019/10/14/american-leadership-on-the-sustainable-development-goals/.

4. Nicoletti, Bernardo. Banking 5.0: How Fintech Will Change Traditional Banks in the ‘New Normal’ POST Pandemic. Palgrave Macmillan, 2021.

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Ali Saleh

Ali Saleh

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Learn with me! I write about anything in which I find passion. I am a writer seeking to add value to your content. Follow me on Linkedin.com/in/ali-s-873722183