One powerful way to meet today’s challenges is to move toward a digital transformation. The financial services sector is a laggard in this respect. There are some exceptions. High-frequency trading and related arbitrage strategies are good examples of the impact new technologies have already made.11 It has become common practice to monitor changes in market prices over tiny fractions of a second, construct arbitrage strategies based on statistical rules, and move in and out of positions at high speed to profit from very short-term fluctuations in prices. In this case, the most important aspect of the digital transformation is the ability to process a sequence of repetitive tasks at speeds previously unknown in trading. For a long time, the high cost of implementing, in a systematic way, these approaches prevented their widespread use. The acquisition and processing of information were not commonly available. They were expensive, raising a barrier to entry for new players. In addition, in the asset management sector, in particular, this first digital transformation 
only really affected the production side of the business and not distribution. Investors who purchased a share in an investment fund from their financial services network continued to receive standard quarterly reports on the performance of their savings. These reports took very limited account of their specific investment objectives (retirement funding, investment for a future real-estate purchase), or of any other holdings in their portfolio.
The second stage in the digital transformation, linked to the emergence of fintech initiatives, has been more far-reaching. It began with the increased availability of solutions that could improve at the same time the entire value chain. Recent information and communications technology (ICT) developments have brought solutions both for the production side (databases, decision-making tools) and for distribution (digital channels, knowledge of customers, good customer experience, and flexibility of customer offerings). These advances are enabling new entrants to find a place in the industry. They allow occupying market niche offerings based on the interactivity and customization sought by younger generations, at a much lower cost than the ones offered by traditional institutions.
On the production side, investment managers increasingly use sophisticated Big Data Analytics and risk management tools to create new products. The biggest change has been in distribution, with customers, or service users as mentioned in this book, receiving offerings personalized to their needs. To achieve this, distributors need to know as much as possible about their customers, hence the widespread use of metrics, quantitative information that distributors collect by closely analyzing their customers’ overall lifestyles. In financial services, customer relationship management was for a long time thought to be the preserve of the large institutions due to the high cost of customer information acquisition. Now, both newcomers and other non-financial entities (telecoms operators, retail chains, and especially e-commerce operators) can use emerging technologies to offer new services to their prospect and customer base. They can also build up new customer bases more easily, as customers are eager to buy personalized services rather than ready-made products. In the asset management industry, this second digital transformation has affected both production and distribution at the same time. By statistically inferring the level of a customer’s income, for example, as well as his/her monthly outgoings, an asset operator can compute the monthly saving capacity and offer suitable investment strategies. These analytical approaches are particularly effective with large customer bases, where it is possible to simulate the behavior of new customers based on the past behavior of existing customers in the same segment. It is also possible to forecast the future behavior of a customer based on his/her particular characteristics. The financial institution can use this information to provide a personalized approach and an excellent customer experience.
-  http://www.bis.org/publ/mktc07.pdf, Accessed 20 August 2016.