Technology has always been the cornerstone of Asset Servicing, with IT and best-in-class systems forming the backbone of the value chain for both marketplaces and players in the field. However, recent years have seen a quantum leap in technology offer and capacity, including DLT, data analysis, AI, alternative communication channels, and quantum computing. As client expectations have shifted, asset servicing companies are now expected to act as consultants, providing feedback and a detailed overview of new technology. It has therefore become crucial to reconcile these growing expectations with a suitable R&D budget and the capacity to deliver.
To address this challenge, it is essential to focus on what is core or and what is not, and what competitive advantages exist. For instance, DLT technology is such a potential game changer for the industry and should be managed internally in close relationship with regulators and participation in as many marketplace trials as possible.
Technology offers more efficient ways of working but still requires specialist staff with securities servicing industry experience, so asset servicers must rapidly integrate it into their product range. Meanwhile, data analysis capacity is at the heart of the asset servicer’s value proposition and is a major differentiating factor that provides competitive advantage.
Sometimes data held with third-parties is inaccessible, so it is often preferable to perform data analysis internally with the asset servicing firm because they are often the ‘one true source’ of the data and are therefore in the optimal position to provide the most accurate and reliable information.
For technologies outside the asset servicing provider’s core offer or those requested by a low number of clients or specific segments, it is essential to find a balance between client satisfaction and profitability. Instead of simply purchasing a solution and integrating it as a white-labelled product, which may impact profitability, industry players should leverage their combined strength. The asset servicing provider should seek out solutions and provide the underlying data, while tech companies render the service based on cutting-edge technology products.
This streamlined technology development and integration process benefits the entire community, with clients gaining a massive increase in the available product catalogue offered by the asset servicing partner, a very light integration process, and the assurance that due diligence for the technology selection was performed professionally. The asset servicing firm benefits from major savings in terms of IT development and the opportunity to build a strong partnership with FinTechs or tech start-ups. Finally, FinTechs benefit from potential access to the scale of the asset servicer company’s client base as well as their sales teams’ knowledge and experience. We often hear about win win strategy with sometimes a reality hard to show. Where appropriate, the combination of large-group and fintechs approaches allows each to capitalize on the strengths of the other and lay the foundations for a healthy and sustainable relationship.
The final customer is also an actor in the process with the possibility to participate in the scouting of FinTechs of interest to him and his peers.
A streamlined integration process and an industrialised model are key to unlocking the full potential of this technology partner solution. The brand awareness of the best-in-class FinTechs partners can also be leveraged as a marketing tool for asset servicing groups, further reducing the attractiveness of a white labelling solution. This goes hand-in-hand with standardised data feed protocols between the asset servicing provider and the FinTechs, automated contractual and payment processes, and centralised monitoring via the asset servicing group’s client web portal or even via API access.
This dual model for technology integration is key to addressing the new challenges the industry is facing such as cost, constantly changing technologies, time-to-market, and open finance. Asset servicing models must adapt, and asset servicing players must shift focus from technology development to technology aggregation, enabling the entire industry to benefit from broader technology access and streamlined integration.
By working together and streamlining the selection and integration process, asset servicing groups can continue to deliver best-in-class service while staying on top of the latest technology, and meeting client expectations.