Investors across Europe are eyeing disruptive technologies to set the stage for a level and borderless investment platform in the future.
FREMONT, CA: The inherent nature of Europe’s integrated financial system offers an opportunity for investment firms to diversify their portfolios. However, the real scenario presents a different picture. European finance is still highly segmented based on national lines. Lack of a level-playing field is one of the primary reasons for the segmented co-existence of the capital markets across Europe. The above statement can be reasoned from the fact that firms in various European countries pay a different rate of interest on their debt. For instance, firms in Greece need to pay 2.5 percent more interest rate on their debt than similar firms operating in the same industry in France. Further, the increased operational cost due to a rise in market complexity is adding to the woes of the financial firms. Moreover, the financial firms are finding it difficult to analyze the massive financial data sets via conventional means.
Trends in new technologies and innovation not only offer an opportunity to address the prevailing economic challenges in Europe but also raise a threat of disruption to conventional financial practices. In a survey, 95 percent of the respondents considered new technologies as the potential means to reduce current operating costs and inefficiency. In the above context, four technologies, namely cloud computing, data and analytics, artificial intelligence (AI), and distributed ledger technology (DLT) are particularly being eyed by the experts as the potential transformer of the European financial sector.
Advanced data and analytics capabilities will enable European firms to improve existing data-driven methods. Such advancement will not only have immediate business advantages but also enable the firms to support future innovations and technical incorporations. On the other hand, the implementation of AI will increase in the coming few years. The potential of AI to generate relevant insights from a massive collection of data certainly makes it useful incorporation in the capital markets. However, improvements in data management will also contribute to the overall effectiveness of AI. DLT looks promising for the European markets as the technology is highly transparent. Though the incorporation of the technology might take some time, the potential of technology in the financial sector can be adjudged from the fact that most of the investment firms have some form of research and development underway into DLT.
Thus, technology is the prime motivator that will transform the European financial sector and provide a common investment platform to the investors irrespective of their nationality.