The Sibos conference is digital this year. After an online programme running from 5-8 October, monthly events will continue into 2021 on the key themes of responsible innovation, delivering digital value, banking for humanity and the future of finance. industry experts share their thoughts below.
HANI KABLAWI, HEAD OF INTERNATIONAL AND CHAIRMAN OF EMEA, BNY MELLON
What benefits do optimised data and transparency through open architecture offer to buy-side firms?
Asset managers’ needs reflect their bespoke strategies. Firms seek innovative ways to differentiate themselves through producing more alpha, gathering more assets or providing superior client service. This innovation comes from many places and no one firm has a monopoly on the best ideas.
It is for this reason that we take an open architecture approach to supporting clients. By joining forces with BlackRock’s Aladdin platform, Bloomberg and SimCorp, we have enabled clients to select best-in-class tools to create a streamlined, frictionless, fully integrated ecosystem. Our alliance with Milestone Group has launched an innovative new suite of oversight and contingent NAV calculation solutions. We have also joined together with other industry players to form the Proxymity consortium that will improve the proxy voting process.
Improved operations and efficiency, alongside more effective risk management are high priorities, but they are just the start. Possibly greater potential comes from the ability to marshal data for competitive advantage – data that helps in gathering assets, improving investment performance and accessing liquidity pools. This is why an open and transparent approach is so attractive. No single provider can deliver everything a firm needs while offering adequate choice and flexibility.
PHILIPPE RUAULT, HEAD OF DIGITAL TRANSFORMATION, BNP PARIBAS SECURITIES SERVICES
What new opportunities does natural language processing offer to asset managers?
The search for greater efficiency is accelerating the digitalisation trend in asset servicing and Covid-19 has ramped up the already significant pressure on the cost base of asset managers.
Technology is often seen as a panacea for alleviating these pressures and natural language processing (NLP) stands out for its ability to help asset managers access new intelligence through their existing data and monitor their asset flows more effectively.
There are broadly two types of NLP software. Natural Language Understanding (NLU) interprets human language, converting large amounts of data into structured data sets that a machine can understand and act upon.
Natural Language Generation (NLG) has the capacity to produce human language, turning structured data into written narratives, making data universally understandable.
NLU allows us to automatically capture, extract and classify data from documents such as fund prospectuses and order confirmations. The resulting structured data sets are then fed directly into the bank’s operational systems.
We have so far automated the processing of 500,000 documents a year, helping us enhance back-office operational efficiency, increase straight-through processing rates and reduce services turnaround times for the benefit of our clients. Meanwhile, NLG is being used to transform hundreds of pages of structured global custody data into concise and insightful commentaries.
RETO FABER, EMEA HEAD OF DIRECT CUSTODY AND CLEARING, CITI
How are current economic conditions and declining margins driving financial institutions to re-examine their transaction lifecycles?
It is hardly a secret that the past few years have not been easy for financial institutions. Margin pressures have been increasing at all stages of the trade lifecycle, from execution, to settlement, to custody. Best execution obligations under MiFID II have eroded margins at the point of trade, while regulation more generally has added substantial cost in the post-trade space. In addition, the trend toward passive investment in ETFs and index funds has resulted in diminishing revenues.
These factors are driving increasing interest in holistic end-to-end solutions that consolidate all activities, interfaces and organisations currently involved in the trade lifecycle to a single provider, delivering a system that maximises automation and straight-through-processing (STP).
Key to this is simplification. For example, the automatic conversion of trade confirmations in FIX format into SWIFT settlement messages, removing the need for a separate middle-office process. Using an integrated trade lifecycle management solution from a single provider not only enables the client to gain additional financial leverage in negotiation, it also opens the door to a strategic relationship which could support collaborative initiatives such as co-investment in new technology or better data management processes.
If the integrated trade lifecycle management solution does not require use of its own broking facilities ¬ but provides a mechanism for connecting and normalising data from multiple brokers, then efficiency does not preclude flexibility.
For example, a global custodian’s asset management clients would be able to access the brokers they need for niche markets, but without incurring the usual connectivity and management overheads.
FRANCIS JACKSON, CEO, INVESTOR SERVICES, RBC
How will digital transformation reform the asset servicing space?
Asset servicing has made great progress in modernising core custody, but challenges remain around fund administration. We are well into a strategy that prioritises digitisation, focused on the quality of the digital client experience. We have determined that the optimal digitisation journey focuses on interoperability, unlocking the value of data, striking the right balance between streamlining existing core platforms as well as creating new service capability.
In our industry, technology is eliminating size as a differentiator. The efficiency benefits of processing technology demonstrate this – for example, asset servicers can provide clients with an API to process transactions efficiently on a lower-cost cloud infrastructure. The ability to provide technology solutions is level across the market, regardless of organisational size.
To remain competitive, an asset servicer’s digitisation strategy should drive innovation. We are exploring technological solutions which enable simpler and faster processing and provide more time for high-value, strategic activities that improve services and support our clients. The right technological solution also provides greater ability to collect detailed processing data, a key component that unlocks the continual improvement of capabilities.
YVAN MIROCHNIKOFF, HEAD OF DIGITAL SOLUTIONS, SOCIETE GENERALE SECURITIES SERVICES
What does digital transformation offer for responsible finance and financial innovation?
The Covid-19 crisis has created a unique economic backdrop this year. Digital transformation is at the heart of change for most asset management firms looking for greater efficiency and increased support from their service providers. The crisis has highlighted the need to strengthen asset managers’ resilience while adapting to a new economic and social environment. In parallel, investors look at ESG [environmental, social and governance] as a safe haven for investment. However, building an ESG strategy requires strong analysis based on extensive data-crunching and timely market information.
New behaviour is emerging, which may lead to solutions based on data outsourcing and financial platforms. Financial innovation helps address investors’ challenges.
During Q2 2020, there was increased interest in search activity and insights for new strategies. Both generate higher expectations in terms of digital capacity to access data and to provide innovative tools based on AI techniques.
We have developed solutions which fit with asset managers’ expectations. This includes a customised funds alert system, providing asset managers with real-time alerts on passive data. And, secondly, dynamic dashboards, with automatic comments generated through Natural Language Generation (NLG).