Securities processing: Insights into the top three digital trends shaping the industry

Many financial institutions today are facing the same dilemma: how to adapt and stay relevant in a digital world. This common challenge influenced the agenda of this year's Information Mosaic User Group, which we held under the theme, 'Embracing the digital revolution in post-trade' and which saw representatives from eight of the top ten global banks in attendance. As this revolution matures and a connected world becomes a reality, we discussed how institutions are adapting their internal processes, client engagement strategies and culture to stay relevant and seize the opportunities available. In doing so, we identified three main trends:

1. Digital technology is transforming the client servicing landscape (and making it more competitive) for post-trade services

The mainstream adoption of digital tools that can transform how banks interact with their clients is just around the corner. Reporting is a prime example of where new technologies are acting as a catalyst for change. Institutional clients have traditionally received a month-end report from their bank, delivered as a PDF via email, listing their current asset holdings, STP rates on trades and corporate actions and all pending activity. Digital innovation is enabling these month-end reports to be replaced with real-time analytics and configurable reports that are easily accessible at any time by the client through a web portal.

While many banks are yet to adopt these technologies, all attendees recognised their role in improving customer engagement and personalisation and are actively considering them as part of their longer term digital strategy. One note of caution voiced by a number of User Group attendees was that work is still needed to simplify and rationalise their back-office processes in order to support client-facing digital offerings.

2. Blockchain holds promise, but robotics and artificial intelligence are already delivering value in the post-trade industry

Feedback from the Forum indicates that firms do not currently have resources dedicated to implementing blockchain solutions, but they do see the technology holding value in the future. By contrast, robotics and artificial intelligence tools are already in use within the industry and are expected to become mainstream within the next three years.

Machine learning and intelligent process automation techniques are being used to automate previously routine and repetitive tasks. For example, robots can now open email attachments, complete e-forms and record data, all while mimicking how humans interact with these software applications, helping to eliminate inefficiencies. Nordea Life and Pensions in Norway has recently announced its latest recruit, Nova, an AI-based chatbot that has been trained to respond to customer questions relating to pension and insurance in Norwegian.

3. Digital transformation is often constrained by legacy architectures

While firms are at different stages in their back office re-organisation, legacy architectures remain a challenge for the majority of banks when implementing digital strategies. Technology infrastructure that has evolved over many years with little strategic oversight still dominates the middle- and back-office, leading to process and reference data duplication, as well as excessive operational risk.

As mentioned earlier, the success of a firm's digital strategy is dependent on having the back-office processes and response times that match the digital front-end. Some institutions are therefore investing in new enterprise-wide platforms where synergies can also be achieved by sharing technologies across business lines and entities. Other firms are considering outsourcing or forming industry utilities where multiple participants come together to mutualise technology costs over time. In the short-term, institutions are also taking intermediary steps by developing solutions for one legacy system or one business area at a time.

Our keynote speaker, Gerald Ashley, who runs St. Mawgan & Co., a management and risk consultancy, concluded the conference. He made the point that in a rapidly changing digital world, being ever more connected involves ever more risk. One of the biggest risks for firms is not the complexity, but losing the connection with the customer. Successful digital transformation is therefore offering the right service, with the right value, that is successfully adopted by clients. At Information Mosaic, we're collaborating with our own clients to develop digital solutions that do exactly that. To find out more, please visit http://www.markit.com/Product/Information-Mosaic


Thomas Cullinan, Director of Information Mosaic Client Solutions, IHS Markit
Tel: +353 1 241 5260
Thomas.Cullinan@ihsmarkit.com

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S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.