Deutsche Börse’s corporate venture arm, DB1 Ventures, in partnership with Celent, a division of Oliver Wyman, has released a paper that highlights the power of future collaboration between leading financial infrastructure players and fintech firms.
The report, “Future of Fintech in Capital Markets”, looks at the value accretion that can be achieved through partnerships between fintech firms and market infrastructure players, in terms of connectivity, distribution, technical, and regulatory expertise across areas that are core to the future of a well-functioning financial system.
It outlines five capital market fintech clusters – core market infrastructure, post- trade digitization, AI & analytics, investment technology and alternative funding platforms.
The paper states that the backbone of the capital markets is the infrastructure that connects asset holders and their intermediaries. In this context, it states that blockchain or distributed ledger technology (DLT) is being touted as one of the most disruptive technologies available at present and in the near future. The technology enables direct peer-to-peer interactions and thus removes complexity of value chains through disintermediation of existing players.
“The potential implications of DLT on core market infrastructure are far-reaching for the capital markets, offering a path to a more efficient market infrastructure”, it said.
It also noted that proof of concepts and/or prototypes that have been reported for use cases around post-trading, that is, settlement systems and payments which includes cross-border payments, issuance of private securities and more. Financial market infrastructure organisations are leading the investment into DLT firms to create new underlying infrastructures and market models for the creation, issuance, and distribution of private securities, democratizing both processes and access.
The paper further stated that market participants will react in several ways to create a new vision for the capital markets of tomorrow. It emphasized on the need for the participants to continually evolve and innovate their business models.
“Trends in digitization will accelerate, and the challenge for established technology firms and market operators will be to find the correct means of collaborating with new business models and innovative technologies”, it said. “The financial market infrastructure provider of tomorrow will have leveraged its leadership in regulation, market structure, trading, clearing, and settlement to guide startup fintech firms in the journey towards creating an effective and safe capital market for the twenty‐first century and beyond.”
