We have always known that large banks handle all their tech topography in the house. These large Tier 1 institutions don’t believe in bringing outside firms to work for them. What you will see is a team of IT experts who handle these tasks for them from their head offices. The point is that financial institutions always establish an IT department filled with several hundreds of tech worker.
This ideology or approach to work has existed since 1990. So, for the first time, we see a deviation from the standard procedure. Everything that has to do with trading infrastructure, the banks use only their internal departments. Although, sometimes, they make use of on-site consultants such as Steria, Accenture, Fujitsu-Siemens or VMWare.
Prime Brokerage recruits external experts
The recent action by the fifth largest foreign exchange dealer in the whole world has changed everything. HSBC has been occupying the fifth position amongst companies holding the largest market share. This week, the company stepped out of its territory to enlist some FinTech firms to join their internal setup. The company has plans to expand its foreign exchange capabilities. They also want to focus more on what they called “superstar” technology.
Already, HSBC commenced by gathering the FinTech firms which it will employ to work internally with them. The bank believes that these newcomers will have something to offer them. With their expertise, HSBC hopes that its products and FX capabilities will be better by such a move. Let’s remember that the key business which the bank handles is foreign exchange. As such, it will go to great lengths to make it work.
How Prime Brokerage will handle the project
We learned that Prime Brokerage is partnering with many companies on this project. They have reached out to companies whose main services are on credit, balance sheet optimization, settlement, risk analytics, robotics, etc. The bank aims at improving every area of its services. As such, it is reaching out to this expert outside the banking space. We believe that this move is commendable coming from the hotshot.
Let’s recall that this action from the bank has changed the whole process which we know from the past. Many years back, banks use two years to develop additional services or to upgrade their existing infrastructure. However, this period, the two years is no longer necessary. The IT departments in banks now collaborate with many FinTech firms to achieve these requirements faster and efficiently too. For instance, HSBC joined the FX Capitolis Novation Service last two months.
HSBC Market Reasons For The Move
HSBC and Citigroup have not been finding it easy in the market for some time now. These two have been losing their market share in FX specifically to XTX Markets. This competing company has now become the number one dealer in foreign exchange.
So, this development will help the bank to maintain its Tier 1 position and also to avoid failing to non-bank FX market makers.