As volatility drives revenue growth, the political shifts may reshape regulations, and capital markets players must demonstrate returns on tech investments as well as adapting to divergent regional demands.
The capital markets industry enters 2025 in a notably different position from the same point 12 months earlier, with a marked return to increased revenue and profit. However, this comes at a critical juncture as the industry prepares for the implementation of Basel III capital requirements in mid-2025, among other regulatory imposed changes.
The unprecedented number of elections in 2024 – more than 80 globally – has created a complex landscape of new governments that may implement diverse policy agendas. This political realignment will shape everything from regulatory oversight to market structure in 2025.
Progress has been made to reduce costs and completed initial pilots of emerging technologies, particularly artificial intelligence (AI), organisations now face mounting pressure to demonstrate concrete returns on their innovation investments. The focus has shifted from experimentation to enterprise-wide implementation, with clear expectations for AI and digital initiatives to deliver measurable efficiency gains and competitive advantages.
The outlook across investment banking, wealth management, securities services and market infrastructure points to accelerated transformation, with organisations seeking to capitalise on technological capabilities while simultaneously managing regulatory challenges. Success will require more than incremental change – it has the on-going need for co-design and co-creation in order to deliver on the future of financial services.
Cognizant's 2025 capital markets outlook examines these dynamics across the four key sub-sectors.
Investment banks
Volatility enables sector to return to growth
Investment banking enters 2025 with renewed momentum, built on increased market volatility that has created favourable trading conditions. The VIX index's sustained volatility has driven strong performance across fixed income, currencies (FIC), and equities trading in both US and European houses, while M&A activity shows signs of sustained growth.
The sector faces several concurrent challenges heading into 2025. The transition to T+1 settlement in major markets requires significant operational and technological adjustments, exposing the limitations of legacy infrastructure. While recent years' cost-cutting measures have created leaner operations, many banks must now accelerate technological investment to remain competitive.
AI's transformative impact is reshaping operations across the value chain. Tasks that previously required months of quantitative analysis and coding can now be completed in dramatically shortened timeframes, enabling rapid product development and deployment. This acceleration, combined with seamless workflows across front, middle, and back offices, is fundamentally changing how banks operate and compete.
Digital asset trading is set to expand significantly, driven by divergent regulatory approaches across major markets. The return of a Trump administration signals a more permissive environment for cryptocurrency assets in the US, contrasting with restrictive policies elsewhere. This regulatory divergence creates both opportunities and challenges, requiring banks to develop regionally tailored approaches.
The implementation of Basel III requirements from mid-2025 presents an additional challenge, increasing capital costs during this period of heavy technological investment. Success will depend on banks' ability to balance these competing demands while reskilling their workforce for an AI-enhanced environment.
Wealth management
Growth meets innovation
The wealth management sector continues its robust expansion trajectory, with particularly strong momentum in Asia-Pacific and emerging markets.
While North America remains the dominant market with substantial absolute growth, the industry's centre of gravity is gradually shifting eastward, as Asia's high-net-worth population continues to expand.
Market dynamics are creating both opportunities and challenges. While inflationary pressures and regulatory requirements continue to squeeze margins, the accelerating transfer of wealth from Baby Boomers to younger generations is triggering new imperatives for service evolution.
This generational shift is driving increased demand for sophisticated estate planning and tax management services, allowing firms to demonstrate value through technical expertise and strategic guidance.
The sector's digital transformation is reaching a new level of maturity, particularly in the application of generative AI. Leading firms are deploying AI-powered solutions to achieve operational efficiencies while enhancing client experience through improved personalisation. This technological advancement enables wealth managers to maintain the high-touch service valued by high-net-worth clients while significantly improving operational efficiency.
Meanwhile, ESG investing is entering a more mature phase, with the focus shifting from broad frameworks to fundamental analysis and data quality. Following concerns about greenwashing, firms are developing more sophisticated approaches to sustainable investing, backed by improved data and analytics capabilities.
The most progressive firms are establishing cross-functional teams to rapidly pilot new AI applications, particularly in areas such as KYC processes, client communications, and document creation. This operational innovation is accompanied by strategic data infrastructure development, preparing for more sophisticated applications to enable highly personalised service delivery at scale.
Securities services
Consolidation shapes evolution
The securities services landscape continues its evolution toward concentration, with scale becoming increasingly critical as technology investment requirements rise. This consolidation trend is creating higher barriers to entry while driving the need for operational efficiency.
While digital transformation progresses, implementation varies significantly across functions. Core processing operations are modernising at different speeds, with some areas achieving rapid automation while others evolve more gradually due to their complexity or risk profile. Data quality issues and testing complexity across multiple technology stacks continue to challenge broader transformation efforts.
Digital asset custody has progressed through new platform deployments, though supporting processes often remain manual in middle and back-office operations. While distributed ledger technology (DLT) and smart contracts show promise, their integration with established infrastructure requires careful orchestration.
The transformation to data-driven value provision continues, though at a pace dictated by legacy system constraints and operational stability requirements. Success depends on balancing innovation with the practical realities of maintaining critical market functions.
Market infrastructure
Evolving core functions
Market infrastructure providers are fundamentally transforming, expanding beyond traditional trading and settlement roles. The emphasis on collateral optimisation and settlement cycle reduction, powered by AI integration, marks a significant shift in operational focus.
The sector sits at a critical juncture where technological capability meets market opportunity. Vast repositories of historical market data, combined with advanced analytics, could generate new business models through sophisticated predictive analytics and scenario modelling. However, realising this potential requires careful navigation of data quality, sovereignty, and security considerations.
Settlement cycles are undergoing revolutionary change through AI implementation, with providers focused on reducing processing times while maintaining robust risk management. This development aligns with central bank objectives around liquidity management and systemic risk reduction.
The increasing sophistication of cyber threats, particularly those leveraging AI, makes security a critical focus. The implementation of the Digital Operational Resilience Act (DORA) drives significant investment in cyber resilience. At the same time, providers must balance innovation with regulatory compliance, particularly in sovereign markets where national interests play a crucial role.
The relationship between infrastructure providers and hyperscalers has matured into essential partnerships, enabling faster innovation while raising important questions about data sovereignty and market control that will need careful navigation through 2025.
