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Magazine Issues » November 2020

Virtual reality: Tech and innovation at The Network Forum

virtual meetingThe Network Forum hosts its first autumn virtual meeting from November 3-5, having been forced by the pandemic to reschedule its planned series of regional events in New York, Singapore and Kuwait.

Linking together network management specialists from major global custodians and broker-dealers, along with sub-custodians and a wide array of service providers and consultants, the conference focuses on regulatory, technology and strategy-driven debates in asset servicing, as well as regional panels providing updates on developments in the Middle East, Asia-Pacific, Africa and the Americas.


How is digitisation and technology innovation delivering new sources of value to bank and broker-dealer clients?
The securities services industry’s adoption of new technology continues to increase – and this trend has only accelerated during the Covid-19 pandemic.

How we use new tech innovations to benefit clients and the overall securities services’ ecosystem is key. At HSBC, we take a holistic approach to delivering more efficient services – taking into account evolving markets, clients’ requirements, and opportunities provided by financial market infrastructures (FMIs).

We also understand that transparent, timely and enriched data are important to our clients. Consequently, our investment is centred on technology that enables clients to connect digitally with us through a range of channels, including portals, APIs [application programming interfaces] and chatbots.

For example, we recently launched Digital Vault, a DLT-based [digital ledger technology] custody platform that gives investors real-time access to records of securities bought on private markets, rather than having to rely on manual processing.

We are also investing in further automation of broker-matching processes, digital account opening and new capabilities such as third-party clearing.

Collaborating further with clients and fintech partners is essential for this ecosystem to digitally transform. In Singapore, for example, we partnered with the Singapore Exchange (SGX), Temasek Holdings and Digital Asset to deliver tokenised bond issuance and, in the process, streamlined asset servicing.

Significantly, standardisation – whether for APIs or messaging protocols – is intrinsic to ensuring market consistency and operational efficiencies. The whole is greater than the sum of its parts.


What are the principal risks on the horizon for asset servicing firms (and their clients) as we move into 2021?
We live in a world of constantly increasing demands from regulators, meaning compliance is on the agenda for everyone. The principal risk is not being compliant with all regulatory obligations. That, in combination with an increasing challenge on information security, will be the main focus next year.

At an early stage of the pandemic we reviewed our operations and working practices, introducing split operations as well as working from home. All staff requiring access to the ‘production’ environment have remained onsite at our offices, but with teams divided between buildings. Staff with non-production responsibilities work from home to a large extent.

So how is the industry facing these challenges when confronted by low interest rates and longstanding margin pressure? The longstanding margin pressures have not changed that much during the last ten years, but the situation is really tough and will continue to be like that. Institutions continue to leave the custody business, a very clear trend in the Nordics in the last few years. At the same time, we feel constant pressure, as a provider of services, to develop due to regulation, changes within infrastructure, and compliance. That means, now more than ten years ago, we can argue against the downward pressure on margins to some extent. The margin squeeze will continue, but it needs to be based on more efficient processes. It is also crucial that the infrastructure is able to reduce, rather than increase, costs – and this hasn’t been the case for many years.