In recent years, the competitive landscape of the securities industry has rapidly evolved, weakening the license dividend, and leading to a decline in securities firm profitability. In this context, brokerages are facing tremendous pressure to transform. Some institutions have used fintech to quickly enter the business field of traditional brokerages and gain a foothold a fiercely competitive market. Several brokerages have also shifted into fintech, hoping to improve their digital capabilities and transform their businesses. The Research Center for Securities Technology, THUIFR, has sought to identify the digital transformation paths for securities firms, including the specific models under each path, and evaluate the advantages, disadvantages, and applicability of different models along these paths. This article explains how to carry out this digital transformation along five dimensions.
There are two clear paths for the digital transformation of brokerages. One is the introduction of products and technologies from outside (internalization). The other is through independent research and development, exporting mature technology the outside (externalization). There are five models under each of these paths that securities firms can pursue based on their strengths and needs. There are no absolute advantages or disadvantages under either of these paths, only the application is different. Under the internalization path, brokerages can choose suitable models according to their own capital strength and the depth of fintech planning. While, under the path of externalization, brokers can choose different models to pursue digital transformation according to their own size and technological strengths. Digital transformation of securities firms can start from construction objectives, implementation areas, core functions, information security and digital ecology, so as to build core competitiveness and develop their industry.
The digital transformation of brokerages still requires extensive participation of many participants. Regulators need to actively guide the digital transformation of brokerages in various forms and guide brokers to embrace fintech by developing relevant industry standards. Brokers need to innovate in internal governance and corporate culture to adapt to the changes brought about by fintech, and to actively participate in the formulation of relevant industry standards.
