Investment Banking and Trading Services Market

Market Overview

The Total Addressable Market (TAM) for Investment Banking and Trading Services was valued at USD 292.5 billion in 2021. It is projected to reach USD 477.64 billion by 2030, growing at a CAGR of 5.60% during the forecast period (2022–2030). Capital raising is a part of investment banking, which offers financial consulting services to individuals and businesses. Investment banking and trading services, which have grown to be one of the largest sectors of the financial services industry, assist businesses, institutions, and governments by providing underwriting services and carrying out transactions like securities trading for both equities and fixed income, mergers, and acquisitions (M&A), and market-making. Investment banking primarily focuses on raising capital for other businesses, governments, and organizations.

The main driver of market growth is the significant financial challenges businesses, investors, and other external forces face when securing funding for business expansions. The increase in demand for fundamental advisory from corporate companies and the necessity for capital and business expansion among firms are the primary drivers of the market growth for investment banking and trading services. Emerging economies like South Korea, Australia, China, Singapore, and India offer excellent opportunities for investment banking solution providers to expand their clientele.

Market Dynamics

Market Drivers

Growing Demand for Capital Requirements and Business Expansion among Firms

The majority of large and medium-sized businesses require capital to expand their operations and their current business operations. Additionally, these companies rely on investment banking and trading services to raise money and launch initial public offerings (IPOs) to meet their capital and business expansion needs. Investment banking assists companies with limited access to capital in preparing a bond offering, negotiating a merger, or setting up a private placement of bonds for their business operations. As a result, the need for capital by both large and medium-sized businesses is increasingly driving the market.

Increasing Financial Difficulties in the Business Environment

Businesses in various industry sectors deal with significant financial difficulties from rivals, investors, and other outside forces. Additionally, a company's ability to secure funding for corporate growth, investment plans, and other operational expenses is impacted by its financial challenges. Further, the cash flow process across all businesses has grown to be a significant concern; as a result, investment banking and trading service firms offer business solutions for financial stability and consulting services for financial issues. Therefore, the market for investment banking and trading services is growing faster than average due to rising financial challenges in business environments and increased competition.

Market Restraint

Strict Government Guidelines and Regulations

Government regulations impact the investment banking sector because different nations have different rules for conducting financial transactions. The management and operations of banks and other ancillary financial entities are also still impacted by banking regulations. Furthermore, the financial industry's regulation has grown to be a significant barrier to the market as governments in different countries impose changing business practices on the sector.

Market Opportunities

Untapped Potential of Emerging Economies

As financial activities continue to increase in emerging economies, there are numerous opportunities for investment banking and trading service providers to diversify their product offerings. In the coming years, it is anticipated that significant investments in digital transformation, the adoption of new technologies like artificial intelligence, Big Data, machine learning, and chatbots, and the rapid expansion of domestic businesses, particularly in nations like Australia, China, India, Singapore, and South Korea, will create the potential for the investment banking market. Additionally, the economies of these developing nations are growing more quickly, and business activity is increasing. In order to stay current with the changing environment, these factors result in a massive opportunity for investment banking and trading services.

Regional Analysis

The global investment banking and trading services market are bifurcated into four regions, namely North America, Europe, Asia-Pacific, and LAMEA.

North America Dominates the Global Market

North America is the most significant shareholder in the global investment banking and trading services market and is expected to grow at a CAGR of 5.8% during the forecast period. The U.S. and Canada are included in North America's investment banking and trading services market analysis. The regional market for investment banking and trading services is expanding due to rising demand for instant trade transactions, secure banking solutions, and goods and services. The increased awareness of investment banking and merger and acquisition solutions among traders, as well as the rise in partnerships between global companies and regulatory bodies for expanding business globally, are other significant factors influencing the growth of the global market in this region.

Many banks and financial institutions have adopted cutting-edge technologies, and investment banking has been extensively used by medium- and large-sized businesses in the U.S. These elements help the market for investment banking and trading services grow more quickly. Various securities services, including investment banking and broker-dealer trading services, are increasingly being offered by banks, financial institutions, and other businesses. Additionally, there is an enormous supply of goods available, including wealth management services and solutions, and proprietary trading is growing in popularity in the area.

Europe region is expected to grow at a CAGR of 9.8%, generating USD 181.16 billion during the forecast period. The UK, Germany, France, Italy, Spain, and the rest of Europe are all included in the analysis of Europe's investment banking and trading services market. An important factor driving the growth of the trading services and investment banking market is the surge in small and medium-sized businesses expanding into international trade and the rise in trade volume from this region. Additionally, the European Union states have accelerated investment banks' technology transformation by considering consistent regulation and additional investment to ensure rapid deployment of competitive technology. This is due to the unprecedented COVID-19 health crisis. As a result, it is anticipated that demand for investment banking and trading services will increase in Europe.

China, India, Japan, Australia, and the rest of Asia-Pacific are all included in the Asia-Pacific investment banking and trading services market analysis. Due to emerging economies and a developing and changing business environment, it is anticipated that this region will hold a sizable market share in the upcoming years. Many banks and businesses in Asia-Pacific and international players are looking to increase their wealth management and investment banking staff to serve their customers better. As a result, these elements spur the market for investment banking and trading services. Governments from the Asia-Pacific region, including those from Japan, India, and Australia, are encouraging the development of investment banking and trading services and goods for local traders and investors.

The development and potential for growth of numerous sectors, as well as favorable government policies toward investors and traders, are some of the main factors accelerating the growth of the market for investment banking and trading services in the LAMEA region. As local banks and financial institutions have turned to the International Finance Corporation (IFC) to facilitate trading services during low liquidity rates, the demand for investment banking and trading services is anticipated to increase. Additionally, the investment banking sector in Mexico is significantly impacted by economic growth, a more robust private sector, and the country's growing relevance in the world of trade, which helped the market in this area grow.

Segmental Analysis

The global investment banking and trading services market are segmented by service type and industry vertical.

Based on service type, the global market is bifurcated into trading and related services, equity underwriting/debt underwriting, financial advisory, and others.

The trading and related services segment is the highest contributor to the market and is expected to grow at a CAGR of 7.1% during the forecast period. As financial activities continue to increase in emerging economies, there are numerous opportunities for investment banking and trading service providers to diversify their product offerings. It is anticipated that significant investments in digital transformation and adopting new technologies like artificial intelligence, Big Data, machine learning, and chatbots will create the potential for the investment banking market. Additionally, the economies of these developing nations are growing more quickly, and business activity is increasing. These factors result in a massive demand for investment banking and trading services to stay current with the changing environment.

An individual or institution assumes financial risk through underwriting equity or debt in exchange for payment. Investment banks act as brokers between businesses looking to raise capital through debt and equity underwriting. Underwriting offers security over the ownership of a company's equity or debt, which investors will trade for capital. Additionally, by issuing common stock, preferred stock, and other equity-related securities, investment banking and trading service firms support and aid businesses with initial public offerings.

Based on industry vertical, the global investment banking and trading services market is bifurcated into BFSI, energy and utilities, IT and telecom, healthcare, manufacturing, retail and consumer goods, media and entertainment, and others.

The BFSI segment owns the highest market share and is expected to grow at a CAGR of 6.7% during the forecast period. Banks, insurance companies, brokerages, and financial advisors frequently use investment banking and trading services. Additionally, investment banks are primarily used by insurance, banking, and financial services companies for a range of trading-related services. The main product lines covered by the BFSI industry include underwriting and securities sales to manage risk and raise capital, executing client trading orders, providing related financing, research, financial advisory and wealth management services, and underwriting and wealth management services. Growing demand for clearing, settlement, custody, and market-making services to support requirements for larger-scale trading is a significant market trend. However, the industry faces challenges due to the decline in average trading commissions, overall contractions, and lower institutional trading volumes across the financial sector.

While the telecommunications sector is heavily involved in providing telecommunications/telephone network and internet service globally, the information technology (IT) sector is continually changing due to the emergence of new technologies. As a result, the industry uses investment banking and trading services for things like capital raising and mergers and acquisitions advice. Investment banking also offers capital services to this sector, including debt and equity, divestitures, and others. Due to the need for secure investment banking and trading services from IT and telecom companies to safeguard sensitive data, the market is forecasted to grow over the forecast period. Utilizing investment banking and trading services enables telecom companies to jointly safeguard and improve their current connectivity and communication services across various devices.

Recent Developments

• September 2022- The JPMorgan Chase & Co. business unit Morgan Health recently announced a USD 20 million strategic investment in LetsGetChecked to support the expansion of convenient and cost-effective at-home medical services. LetsGetChecked provides medical tools that make it simple and effective for patients to manage their health from home.
• September 2022- Visual Structuring, a brand-new tool for options price discovery and trade idea generation still subject to patent, was launched by Goldman Sachs and is accessible through Goldman Sachs Marquee.