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Future of Investment Banking in India


As soon as we talk about investment banking, usually, a smiling audience is replaced with a highly attentive one because let's be real, it is a highly rewarding career prospect which pays huge paychecks & ensures a lavish life. But everything comes at a price and this job right here proves to be a bloodsucker during the initial years. Long working hours requiring utmost concentration is how you spend the majority of your time.


We talked about the qualities one need to possess to break into IB previously. Check it out here.

Based on our assessment, out of 500 readers, we expect 100 of you to automatically reflect these qualities. Almost 150 of you might have some of these but trying to develop the rest of them. And the last lot of 250 readers might not be interested at all.


Well, this post is for those readers who already have or are in the process of developing these qualities. You might become ready for Investment Banking but is Investment Banking ready for you? Let’s find out.


Factually speaking, India generated $222 million from investment banking activities in Q1FY20, down by 33.6 per cent from Q1FY19, as per a report by Refinitiv titled India’s Investment Banking Review for First Quarter 2020. A lot of it can be easily attributed to the presence of an unprecedented global pandemic event accelerated by COVID-19.


However, the pandemic has exposed certain vulnerabilities and opportunities, which need to be addressed to enable greater resiliency, sustainability and efficiency for the IB. Investment banks face significant challenges driven by COVID-19 impacts, evolving financial regulations, market democratization, increased client sophistication, a shift to remote working arrangements, and rapid technology advances. There are opportunities for banks to drive toward higher levels of return; however, to achieve this, they likely will need to retool certain business models and operational platforms.


We expect the investment banking industry to undergo a bifurcation of broker archetypes: “flow players” that focus on middle- and back-office functions and “client capturers” that specialize in front-office functions. These archetypes will likely operate within an interconnected, increasingly global (and, potentially, virtual) ecosystem that includes partners collaborations that provide various back-office functions.


So, every IB aspirant needs to work on his/her skill set and determine the type of work they want to do. Be it back-end or front-end operations, both require data-crunching skills either using technology or your judgement to reach the desired result.


On the other hand, investment banks will also need to determine which role they want and, depending on internal and external factors, can play within the ecosystem. They also will likely need to redesign their service delivery around a connected flow model—moving capacity and processes to the ecosystem of market providers—and optimize the use of financial technology, data, and analytics to generate differentiated insight and added value.


Industry realignment should create opportunities for investment banks to drive toward higher levels of return. However, to deliver on this agenda, organizations can no longer tinker around the edges. Many will likely need to dramatically retool their current business models and operational platforms to prioritize client centricity, disruptive technologies, regulatory re calibration, and workforce and workplace evolution. Besides, they should determine which archetype they want and can be within the new ecosystem.


The investment bank is now an agile participant in a sophisticated ecosystem addressing today’s market trends and focused on differentiators such as risk models and customer experience. Ultimately, only a few value-add functions would need to be implemented in an investment bank’s internal systems: risk management, payments, internal and external data processing (such as client data and regulatory reporting data), and general ledger.


Are investment banks willing to rethink, rebuild, and rely on others to improve their future competitiveness?


Essentially, it can be done after some of these obstacles in delivering the investment bank of the future are accounted for, which are as follows:


1. Local market structures are so complex and nuanced that an industry solution in the near term requires significant collaboration and cooperation

2. Uncertainty as to the role of individual market participants, incumbent service providers, utilities, and fin tech should play

3. Uncertainty around optimal operational and ownership structures of services provided within the ecosystem

4. Ability to develop a convincing strategic business case with incremental benefit realization within the early years of investment


To overcome the obstacles, investment banks must have a principled approach to strategic planning and delivery. As long as considerable barriers to market entry remain in place (capital requirements, regulatory scrutiny, conduct risk, and long-standing client relationships), investment banks are unlikely to have their market share challenged by digital disruptors or other non-industry competitors.


Thus, we are bullish on the investment banking industry in India. The challenges are not insurmountable. The solutions are at hand, and the opportunities are enormous.

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