Sat. May 18th, 2024

The investment banking industry is experiencing transformation after the global economic crisis. The companies in the investment banking sector in the United States is attempting to recover the productivity they had before.

The key players in the US investment banking industry are moving from their customary underwriting business to fundraising, acquisitions advisory, and other activities. The recent regulatory changes constrained the industry to undergo these changes, making the investment banking activities more expensive. Moreover, the ever-increasing need for in-house applications, innovative customer-facing portals, transparency, and security across the board has pressurized the investment banking further.

Read on to know the challenges faced by investment banking industry

Investment banking industry challenges

According to Deloitte, the industry challenges in investment banking revolve around cost reduction, client experience enhancement, cybersecurity, talent acquisition, electronification, and, so forth. Let us have a brief note on these challenges.

Influence of Regulations

Investment banks are actively engaged in meeting the IFRS 9 requirements and changing the business model. Basel III is focusing on maintaining core liquidity. As a result, there is pressure to:

  • Reduce short-term funding
  • Hold liquid assets
  • Raise long-term wholesale funding
  • Reduce leverage for on and off-sheet balance

Pressure on cost reduction

Investment banks are pressurized to reduce costs. However, factors such as declining revenues, excessive costs, digital development, and regulatory pressure are making the investment banking companies difficult to achieve the goal.

Enhance client experience

The change in customer-centric experiences in B2C and B2B business models is difficult to meet. With an eye on capital returns, it is a real challenge to:

  • Measure and cross-sell products
  • Assess the existing client experience
  • Map the client experience standards
  • Identify the changes

The emergence of fintech companies

The African financial services seem to be one of the receptive to FinTech markets. This has paved the way for blockchain and it is indeed changing the cross-border lending activity.

Physical infrastructure

The traditional and outdated physical infrastructure is restricting the movement in the digital age. It has proven inflexible in today’s disruptive marketplace.

Talent acquisition

The companies struggle to retain top talent even after faster promotions. The lifestyle of an investment banker is associated with long hours of working and this is drawing the younger professionals to look for alternative sectors. Candidates with investment banking certification are hard to retain.


Cyber-threats are raising and legacy technology is prone to risks. The unpatched vulnerabilities and compatibility issues in merger and acquisition situations are creating fire-fighting challenges.

The increasing complexity of reporting

The increasing pressure on data optimization and evolving demand for reporting compliance has posed new challenges for all investment banks.

Client onboarding challenge

The banks are pressurized to clean up their adherence to AML and KYC. They are further asked to remediate and streamline the existing procedures. The review of the existing business model and client segmentation requires higher capital.

These are some of the challenges as per Deloitte and Infiniti Research, the market intelligence company.

The future

The changes in the financial services landscape to date look like the beginning. The investment banking industry must develop innovative strategies to combat new disruption. Success in the new environment can be seen if the financial institutions tweak and channel themselves for the customers.


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