The past year saw a significant uptick in discussions around technology, as the opportunities from advanced data gathering and process improvement become hard for asset servicers to ignore. More asset managers are asking questions of their asset servicer to understand how and if they are thinking about deploying new and emerging technologies in their operations – and they should.
More data than ever before is being generated, and by a wider variety of sources. The real-time capturing and analyzing of this data helps firms make more informed, accurate business decisions, enables more oversight, and better supports ever increasing regulatory requirements. Most importantly, asset servicers with advanced techniques to acquire this data can pass it along to their clients, helping them gain a significant advantage over their peers.
Digital technologies provide process improvement potential for asset servicers by creating efficiency and transparency, reducing risk, and improving quality of service to clients. Robotics Processing Automation (RPA), a computer application that automates tasks performed by humans, is one of these technologies. This application can perform human tasks faster, more accurately, and continuously. In asset servicing, RPA can automate middle and back-office processes. Some speculate that automation could drastically overhaul the headcount in the asset servicing industry.1 However, others, including BBH, believe the impact will be modest in the short term. While RPA will reduce inefficiencies and therefore could impact headcount, it will also replace lower skilled jobs with those that require advanced skills. The RPA function will need to be managed by employees with an elevated knowledge level and skillset.
Like other forms of automation, asset servicers are using artificial intelligence (AI) and machine learning (ML) to help clients meet regulatory demands, automate middle- and back-office functions, and improve client service. Eighty percent (80%) of company data is unstructured, but AI analytics can turn that data into an asset.2 It can access millions of data points, analyze them, and draw conclusions so that their asset manager clients can achieve greater transparency and oversight of their investments. Ultimately, an asset servicer’s ability to access this data from back-office platforms and turn it into actionable insights for portfolio managers, finance, risk, compliance, and regulators can be a value add for asset managers.
A conversation on digital technologies would not be complete without mentioning distributed ledger technology (DLT), which many perceive as a potential game changer. While blockchain is most notable as the underlying technology behind cryptocurrencies like Bitcoin and Ethereum, it is merely one type of distributed ledger. In fact, DLT is viewed as having a compelling range of applications asset servicers can benefit from when both transacting and investing, with potential to impact assetservicing processes like securities settlement, corporate actions, and middle- and back-office tasks. It appears DLT, though, will not change what asset servicers do but how they do it. If it proves to be a superior technology for record keeping, transaction processing, and information gathering, it could lower costs to serve clients and fuel an asset servicer’s success.
Still, obstacles stand in the way of a quick and vigorous adoption of DLT in the industry. Implementing blockchain will require a wide set of industry participants to give up their own processes and embrace a new way of thinking. While some asset servicers are actively trying to implement the technology using different approaches, until now, DLT has delivered too few use cases to presume it provides a better mousetrap, so there is little first-mover advantage.
- How do you focus on identifying and developing new technology for your clients? Do you have a digital transformation program and what does it look like?
- What applications are you developing to gain efficiency, increase transparency, and reduce risk from manual activities?
- What is your stance on distributed ledger technology?
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1 Deloitte, The Future of Asset Servicing, 2017
2 VentureBeat, July 11, 2017