Harry Stahl is Senior Director of Enterprise Strategy at FIS.
What were the key theme(s) for your business in 2023?
One strong theme for FIS in 2023 was a focus on cloud and as-a-service solutions. For banks and asset managers alike, executives found themselves caught in the vise between customer/investor/trader demands for modern platforms and data-driven tools, and rising interest rates that made it harder to fund modernization and new capabilities. In the face of this, FIS clients and the industry at large found that cloud and SaaS platforms provide API-driven options, supporting new tech implementations at scale, with more speed, flexibility, and cost-efficiency than solutions built from scratch, or the effort of adapting pre-built products from third parties.
What was the highlight of 2023?
OpenAI’s ChatGPT was formally launched on Nov 30 of 2022, but 2023 will be remembered as the year generative AI went mainstream. Consumers and strategists from every industry were fixated on its expanding capabilities, potential applications, and related risks. Many financial services institutions began experimenting with and assessing generative AI, and soon we’ll see an “implementation” phase as the industry figures out best practice and we receive more regulatory guidance.
What surprised you in 2023?
We expected ongoing evolution of new technology, but we didn’t anticipate the explosive impact of generative AI across consumer and corporate users and around the world. Gen AI will clearly change many aspects of how we do business and even how we define labor. And these changes are coming at hyper speed.
What are your expectations for 2024?
Generative AI aside, the immediate trend that traders and strategists should still be concerned about is liquidity, third-party, and contagion risk. The collapse of Silicon Valley Bank happened in 2023, and the resulting proposal from regulators to hike capital requirements has caused consternation among banking leaders. Whatever the final decision, it will affect lending markets, especially in a high interest-rate economy, and bleed into equity markets in turn. Related to this, regulators globally are increasing their scrutiny, enforcement, and specific requirements related to multiple types of risk.
What trends are getting underway that people may not know about but will be important?
According to our latest Global Innovation Report, only 55% of financial services firms are using RegTech, but 83% of financial services respondents see it as way to manage the risks they face. This makes sense given the risk and compliance issues above. And as buy-side firms increasingly taking on sell-side functionalities, front-office strategists may soon find themselves more affected not just by markets-related regulations, but by the operational side as well, inspiring a new appreciation for completely front-to-back workflows across the capital markets ecosystem. Front-office strategists need to be aware of, and make good use of, technology historically siloed to the back-office and compliance teams.
Machine learning and generative AI can bring huge benefits to RegTech, streamlining processes, handling massive data in analytics, interpreting unstructured data, generating outputs. But these benefits come with new risks, which mean robust data infrastructures, airtight oversight, and rigorous testing are critical.
