By Dan Reid, Chief Technology Officer, Xceptor
As trade volumes surge and regulatory demands intensify, capital markets firms are under increasing pressure to do more with less. Many firms are racing to transform customer experience and modernize front-end systems, but the real bottleneck lies deeper; in the fragmented, manual processes of middle- and back-office processes.
Faced with this reality, a new global study by Crisil Coalition Greenwich exposes a simple but urgent truth: true transformation requires a front-to-back approach. Without modernizing the core functions that underpin everything from data ingestion to exception handling, firms will struggle to scale digital initiatives or unlock meaningful business value.
The research provides a sharp snapshot of where firms currently stand in their data automation and AI journeys, and what still stands in their way.
Efficiency as a competitive differentiator
Operational efficiency remains the number one driver for digital transformation efforts, cited by nearly 90% of respondents. In an environment where margins are under pressure and regulatory demands are rising, this comes as little surprise. What is notable, however, is how difficult firms are finding it to realize these gains in practice.
The study reveals that legacy infrastructure and siloed processes remain major barriers to transformation, with over half (57%) of respondents citing outdated or hard-to-integrate systems as a primary obstacle. This was reported particularly in the middle and back office, where many workflows remain manual, fragmented, and error prone.
The hidden cost of inaction
While the initial cost of digital transformation may seem daunting, the cost of inaction is far greater, and impossible to ignore.
Legacy systems are just one of the barriers – and costs – businesses face when undergoing transformation efforts. Another is the manual processes.
According to the research, 43% of respondents still manage up to 25% of their data manually, citing regulatory reporting (80%), client onboarding (79%), and reconciliations (77%) as the most common operational processes to rely on manual intervention include.
Working in this way not only introduces delays, errors, and inefficiencies that directly impact decision-making and client service, but respondents report that their teams spend up to a few hours to remediate issues and exceptions, which prevents them from focusing on higher-value, strategic work.
More than a technical inconvenience, firms are feeling the friction caused by these systems in other ways including considerable cost and risk implications. According to the report, firms are having to reserve up to 5% of annual capital to cover remediation costs each year. These costs represent not just reduced agility and lost opportunities, but increased exposure to regulatory and operational risk as well.
Data holds the key, but much of it remains out of reach
A core takeaway from the report is that data is both a catalyst and a roadblock in the automation journey. On the positive side, 58% of respondents have already taken concrete steps to improve data capture, and many others are actively planning to do so within the next year.
Firms across the front-, middle-, and back-office all cite data capture and transformation tools as a primary focus of digital transformation. Furthermore, it demonstrates pushback against legacy systems, and the challenges they pose.
To better handle the increasing data firms face, AI and automation are key.
AI adoption is growing, cautiously
AI is gaining traction in capital markets operations, with 33% of firms already using it in some capacity and a further fifth (19%) planning to adopt it within the next 12 months. This adoption is heavily led by use cases such as data enrichment, process automation, and exception handling.
Although 60% of respondents see AI as important to their digital transformation strategy, the broader sentiment remains mixed. One in three firms remain cautious about AI’s ability to deliver immediate value, particularly without more robust data foundations in place.
This caution isn’t necessarily a weakness. Instead, it reflects a growing recognition that AI implementation requires structure, context, and clean data to function effectively. This further reinforces the need for systematic automation and digitization of back-office processes before more advanced capabilities can be layered in. AI is only as effective as the data it’s built on.
Point solutions are creating fragmentation
The data also suggests many capital markets firms are still relying on ad hoc point solutions to solve specific operational issues, with firms using up to five different platforms to cover asset classes. While these tools may deliver short-term relief, they often introduce new problems around data fragmentation, inconsistent workflows, and increased integration burden.
As the study notes, “The abundance of point solutions has led to a growing landscape of niche tools, but not necessarily a more integrated or agile environment.”
Respondents consistently pointed to the need for a more cohesive automation strategy; one that spans front, middle, and back offices and connects data flows across the entire lifecycle of a trade or transaction.
Building on a modern foundation
The report identifies three key areas that provide a path forward for firms ready to accelerate their automation journey:
- Consolidate and standardize data at the source: Fragmented, manually collected data remains the single biggest obstacle to meaningful automation.
- Invest in integration-ready infrastructure: Outdated systems that can’t communicate with modern APIs or workflows are bottlenecks that must be addressed.
- Target middle and back-office processes: These functions remain some of the most under-automated in capital markets, and the biggest sources of cost and risk.
The latest data automation platforms are helping pave the way by enabling clients to automate data ingestion, transformation, and exception handling without requiring wholesale system replacements. Adopting this pragmatic, incremental approach allows firms to modernize the core operational backbone while maintaining continuity across critical processes.
The transformation gap is real. It’s also solvable.
As the Crisil Coalition Greenwich report observes: “The front office may get the attention, but the back office determines whether transformation actually delivers results.”
For firms that have spent the past decade investing in customer-facing platforms, the message is clear, it’s time to complete the picture. Firms must also recognize that digital transformation amounts to more than simply faster processes; it’s equally about resilience, transparency, and the ability to adapt quickly to new market demands.
Without a strong automation layer running beneath the surface, digital transformation will remain an expensive, incomplete promise.
Data holds the key, but much of it remains out of reach
A core takeaway from the report is that data is both the catalyst and the choke point in the automation journey. On the positive side, 58% of respondents have already taken concrete steps to improve data capture, and many others are actively planning to do so within the next year.
