The financial services industry is undergoing a profound transformation as we navigate 2025. From artificial intelligence becoming a must-have capability to the rise of financial mega-factories, several key trends are reshaping how capital markets operate. Datos Insights’ Vinod Jain and Jay Wolstenholme examine the top 10 major developments that are defining this pivotal year.
1. The AI and automation revolution
Artificial intelligence has transitioned from being a nice-to-have enhancement to an essential business capability across capital markets. With mounting pressure for return on investment, firms are increasingly turning to AI and automation to maintain their competitive edge. This shift is enabling organisations to provide more value-add, high-touch services while fostering innovation around new products and instruments with higher returns.
The transformation of raw data into actionable, ROI-based information is fuelling this adoption. Firms that successfully balance innovation with risk mitigation are positioned to take a significant leap forward in the market. This is particularly evident in the investment management space, where technological capabilities have become a crucial selection criterion for institutional investors.
2. Front-to-back investment workflow reengineering
With fee compression averaging 15-20% across asset management over the past five years, firms are under intense pressure to improve operational efficiency. Investment managers who have implemented straight-through processing systems are seeing impressive results: 50-60% reduction in trade processing times and up to 40% decrease in operational costs, all whilst reducing error rates across the trade lifecycle.
The modern investor demands real-time portfolio transparency, personalised reporting, and seamless digital experiences. In fact, 75% of institutional investors now consider a manager’s technological capabilities as a key selection criterion. This has pushed firms to modernise their systems, enabling them to scale assets under management without proportional cost increases and enter new markets or asset classes in months rather than years.
3. The data revolution
The volume of market data has exploded, growing from approximately 100 petabytes daily in global markets in 2020 to over 300 petabytes daily in 2024. Multi-asset strategies have become increasingly complex, requiring firms to synthesise data across multiple public and private asset classes. Each asset class brings its own unique data structures, update frequencies, and regulatory requirements.
Modern financial institutions must now process and analyse an unprecedented variety of nontraditional data sources, including satellite imagery, social media sentiment, mobile device location data, and sensor data. This requires sophisticated data management systems that can handle both structured and unstructured data while maintaining data quality and accessibility.
4. Risk analytics takes centre stage
Institutional managers are significantly increasing their investment in risk management and performance analytics tools, with technology spending in this area growing by over 45% annually. The largest institutional managers are reportedly allocating more than $100 million annually to enhance their quantitative analytics capabilities.
This focus on risk analytics is driven by the increasing complexity of modern portfolios, which now include multi-asset strategies, derivatives, structured products, and private markets all interacting in both linear and nonlinear ways. The integration of alternative data, private markets, factor tilts, direct indexing, and ESG risk factors has created multiple new dimensions of market risk that demand sophisticated quantitative analysis.
5. The rise of financial mega-factories
The industry is witnessing the emergence of dominant service providers known as “mega factories” – fund administrators, custodians, and tech vendors that offer comprehensive front-to-back solutions. These providers now process more than $7 trillion in daily transactions, a 65% increase from five years ago. They’re making substantial investments in technology infrastructure and talent to deliver end-to-end services, effectively transforming themselves into essential infrastructure providers for the financial sector.
6. Regulatory technology convergence
The regulatory technology landscape is shifting from fragmented solutions to integrated compliance platforms. Global regulatory fines reached $12 billion in 2023-2024, pushing institutions toward unified compliance and surveillance architectures. By 2025, approximately 65% of major financial institutions are expected to implement or begin transitioning to holistic compliance platforms.
Early adopters of unified compliance solutions are seeing impressive results: 45% reduction in reporting errors, 60% improvement in change management efficiency, and a 25% decrease in operational costs. These platforms enable real-time impact analysis across regulatory obligations, significantly reducing the risk of cascading compliance failures.
7. Trading automation and high touch services
Electronic trading volume has surged dramatically, with 82% of global equity trading now executed electronically, up from 65% in 2019. Low touch trading accounts for approximately 73% of institutional flow, resulting in a 45% reduction in transaction costs and a 68% improvement in execution speed.
The global spend on trading workflow automation is projected to reach $12.4 billion by 2025, growing at a CAGR of 16.8%. Integration of high touch and low touch workflows has become a key focus, with top-tier banks investing $50-75 million in unified trading platforms.
8. Private markets evolution
The private credit market has witnessed a remarkable expansion, growing from $875 billion in 2020 to more than $1.6 trillion. This surge can be attributed to the accelerated modernisation of infrastructure and the democratisation of market access through digital platforms. These technological advancements have enabled a broader range of investors to participate in the market, fostering a more inclusive and dynamic financial ecosystem.
In response to these changes, large financial institutions are increasingly adopting unified data platforms that manage both public and private securities. This integration streamlines operations, reduces redundancies, and enhances transparency, allowing firms to navigate the complex regulatory landscape more efficiently. The move towards unified platforms signifies a fundamental shift in the way financial institutions approach data management, positioning them for greater success in the evolving market
9. Collateral management transformation
Collateral management is undergoing a profound transformation, driven by advancements in real-time processing capabilities, integrated risk frameworks, and digital asset infrastructure. Firms are achieving remarkable efficiency with 93% of margin calls resolved automatically through AI-powered pre-validation checks. The incorporation of ESG considerations, along with the advent of tokenised assets, is redefining traditional collateral systems. This multi-year evolution is optimising processes and enhancing the resilience of collateral management frameworks.
Additionally, the proliferation of advanced analytics platforms is making inventory management optimisation a critical focus. With 93% of margin calls now managed via system-to-system integrations, firms are developing hybrid systems that can seamlessly handle both traditional and digital assets. This convergence is reshaping infrastructure investing, enabling more sophisticated and agile approaches to collateral management. As a result, firms are better equipped to navigate the complexities of the modern financial landscape.
10. No, or low, code revolution
Despite 70-80% of major financial institutions still depending on core legacy systems, low code platforms provide a pragmatic bridge to modernisation. These platforms enable firms to reduce IT development costs while accelerating application delivery from month to days. Business users can now directly build and modify workflows without deep technical expertise, reducing process optimisation time by 65% and increasing staff engagement by 40%.
As we progress through 2025, these trends are not just reshaping the capital markets landscape – they’re fundamentally transforming how financial institutions operate, compete, and deliver value to their clients. Success in this new environment will depend on firms’ ability to embrace these changes while maintaining robust risk management and regulatory compliance frameworks. Those that can effectively navigate this transformation will be well-positioned to capture the opportunities that lie ahead in an increasingly digital and automated financial world.