Financial infrastructure firms are wrestling with technological and economic challenges across many dimensions. Some are multiyear priorities — for example, the climate transition. Others require fresh attention, such as in operational efficiency, pricing, and go-to-market approaches.

And some issues will come to the fore this year as broader global trends impact the industry — for example, navigating the talent landscape amid a changing economy, the next generation of data management, and growing macroeconomic divergence between the West, Asia, and the Middle East.

At this critical juncture for global markets and financial market infrastructure (FMI) providers, here are 10 challenges driving our discussions with FMI firms.

1. How to raise prices amid cooling inflation

With inflation decelerating, it will be more difficult for FMI firms to push through broad price increases than in the recent past. Executives will need to focus on five commercial strategies to continue the momentum they enjoyed in the rising-inflation environment of the past two years: Optimize pricing by introducing more sophisticated differentiation across segments and value‑based logics; focus on monetizing new services and new datasets; identify expansion opportunities into adjacent segments; deepen client relationships; and focus on customer success functions as a critical building block for growing the top line, with a key metric being customer satisfaction. 

2. Finding the next efficient frontier in operating models

While leaders have maintained flat costs and mitigated inflationary pressures, primarily through hunkering down on capital spending, hiring, compensation adjustments, and non-core discretionary spending, many firms still grapple with inflation, affecting both people and technology expenses. We anticipate that the efficiency leaders of the future will fundamentally re-evaluate their operating models, automating more processes, digitizing customer touchpoints, empowering front-line staff to drive product development, and reconsidering traditional organizational silos. 

3. Talent strategies in a changing market

Attracting and retaining human capital is essential for competitiveness. FMI firms are competing aggressively for scarce skills such as analytics and machine learning — and this is exacerbated by FMIs not necessarily having the prestige that banks or technology companies do in attracting top talent. Besides pay and benefits, firms need to focus on the broader employee proposition, including career opportunities, wellbeing programs, and flexibility. 

4. Next generation data and enterprise data management

Interest in data domains outside traditional financial market data is exploding of late — particularly in areas that benefit from the financialization of the real economy, such as energy, transportation, and private markets. Market infrastructure players historically have focused their data strategy on direct synergies with their listing and trading operations, either commercializing venue “exhaust data” or selling data that would generate more listing and trading activity. The more ambitious players will now pivot toward the broader strategic value of certain data assets that bolster trust, transparency, and participation. We expect this to lead to investments in new data domains further away from their core financial markets. 

5. Aiding a new phase of climate-aware investing

New climate-reporting rules are allowing climate-aware investors to shift their focus from a top-down view of the overall sector to a more bottom-up sense of how individual businesses can abate their own carbon footprint and the role they can play in supporting climate action in the wider economy. Part of the new armory will be better information, comparable metrics, and more forward-looking assessments of how well management teams are tackling climate change and which innovations they are relying on. In addition, focus is shifting to physical measurement, monitoring, and solutions. We expect high competition for new data sources, information gathering techniques, and modelling capability to manage this new level of complexity from within and outside the FMI community.

6. Building the infrastructure for a new cycle in private markets

In 2022, we urged FMIs to go on offense with respect to private markets. We retain this view despite a challenging environment for private markets asset classes, as higher interest rates complicate fundraising and deployment. In 2024, we see three opportunities for FMIs in private markets:

• Building out private placement platforms that connect issuers (corporate, infrastructure, real estate) with investors, benefitting from the tailwinds of proposed Basel 3 Endgame rules that shift more of the underwriting to investors without direct access to issuers.
  
• Building out platforms for LP-secondaries that help to bring both liquidity and price discovery into a very opaque market characterized by low liquidity and large spreads.
  
• Discovering private markets firms as valuable client groups, not only to benefit from them potentially publicly listing portfolio companies but also as buyers of data, information, and workflow.

7. A new wave of risk priorities and techniques emerges

A set of targeted and thematic regulatory priorities on the horizon will have implications for risk teams and the broader business. Resiliency sits front and center in many instances, with new requirements like the Digital Operational Resilience Act (DORA) regulation set to go live in 2025. We are also seeing increased focus on integrity risks, including market surveillance, anti-money-laundering (AML) processes, and know your customer (KYC) rules — with some FMI firms not only focusing on their management of these risks in-house but also creating solutions for market participants more generally.

We are also seeing development of more sophisticated approaches to risk management within financial infrastructure organizations as risk teams seek deployment of better data, tooling, and analysis across their organizations to support proactive risk identification, expedient decision-making, and better partnership between first and second lines of defence.

8. Global capital flows decouple toward emerging regional liquidity centers

Recent geopolitical events and some divergence of capital market regulatory regimes have given rise to a decoupling across global capital markets. Alongside the traditionally dominant poles of New York/London and Tokyo/Hong Kong, a wave of capital markets hubs across the Middle East and North Africa, Latin America, and Southeast Asia are looking to build out infrastructure and attract flows as investors and institutions bring capital and presence on shore. Bold and ambitious statements have been made public in recent years as governments, regulators, and private providers invest to deliver issuer, investor, and intermediary-friendly capital markets ecosystems domestically.

We expect further and faster movement on initiatives aimed at establishing deeper pools of local activity across more asset classes to attract international capital and benefit local economies. However, the comparative advantage and solutions may well need to look different by geography.

9. FMI firms at the crossroads of cloud innovation

FMI firms have traditionally partnered with cloud and network providers to deliver solutions with low latency speeds to clients. Some cloud solution providers (CSPs) are now also partnering on product development with large FMI firms, and promise significant customer benefits. But many FMI firms are grappling to define their own role in providing technology solutions, and whether to expand their own capabilities without partners. Will FMIs continue to observe technological advances from the sidelines and adopt them through partnerships, or will they take the bold step of expanding their own tech offerings? The answer to this question will redefine the competitive boundaries of FMI firms and shape the future of the financial industry.

10. Tokenization drives industry mobilization

The world of finance is undergoing a paradigm shift as banks, market infrastructure firms, and globally systemically important banks (GSIBs) actively explore the benefits of tokenization. From balance sheet optimization, funds tokenization, and distribution to native digital securities issuance and settlement, tokenization and blockchain applications are gaining momentum. So, too, is the need for interoperability, as participants seek a common protocol to connect proprietary solutions.

As tokenization evolves in the coming years, the governance structures provided by clearinghouses will offer a platform for smart contract applications, enabling concepts such as intraday balance sheet optimization.