VIDEO | Facing mounting regulatory pressures, fee compression, and rising client expectations, Nordic custodians are navigating a critical balance between operational scale and innovation. At PostTrade 360° Nordic 2024, industry experts examined how evolving technologies like AI and blockchain, combined with strategic partnerships and a client-centered approach, are shaping the future of custodial services. Though regulatory demands and cost constraints present significant challenges, speakers highlighted new paths to differentiation, particularly by enhancing service offerings and embracing flexible, forward-looking infrastructure.

Niklas Nyberg of SEB, addressed the debate around whether core custody services have become commoditised. “Yes and no,” he observed. “We’re not all the same, our delivery models differ widely. Complex clients scrutinise these details, and they deserve tailored solutions that go beyond standardised offerings.” Hans Martin Aulie of DNB Bank ASA agreed, emphasising, “The core product within custody, it’s a commodity, settlement of transaction, movement of cash and asset servicing but we’re also a people business. We connect with people and that is where we distinguish.”

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The conversation then shifted to the role of emerging technologies, with a particular focus on AI and blockchain. Aulie noted that AI is already reshaping operations by reducing data processing times. “We process a lot of data as a custodian, using AI reduces the time to market from maybe half a day to a few minutes,” he said. Although blockchain and Distributed Ledger Technology (DLT) have been anticipated as game-changers, Nyberg cautioned that widespread adoption requires regulatory frameworks, specifically mentioning the upcoming MICA regulations in Europe. “We need some type of regulation,” he said, adding that this will “enable a faster and more controlled adoption.”

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Old infrastructure

Modernising legacy systems was identified as another pressing issue. Mads Bøgh Arildsen-Walin of Danske Bank pointed out that much of the financial sector still relies on infrastructure developed in the 1970s. “The gap between old technology and modern business models is too wide to bridge with incremental adjustments,” he observed. Richard Wilson of S&P Global compared the gradual approach to fixing these systems as “fixing the plumbing only when the water leaks,” highlighting that minor updates are often insufficient, and more fundamental updates are required.

Given the expense and complexity of in-house development, the panelists emphasised strategic partnerships as a vital approach. Aulie noted that smaller Nordic banks, while significant in their regional markets, cannot match global players’ resources for technology investment. “To compete, we partner with global institutions and specialised firms, allowing us to offer top-tier services without overstretching,” he said. Nyberg underscored the importance of interoperability within partnerships, “to enable our clients to choose the providers that they want to work with and seamlessly get them into our infrastructure.”

Competitive edge

Finally, the panel discussed the build-versus-buy decision in today’s market. Arildsen-Walin described a strategic shift, explaining, “We’re moving towards building where we see a distinct competitive edge, and buying everything else.” He highlighted that this approach allows institutions to streamline their tech stack, focusing only on areas that add real value. Aulie echoed this sentiment, noting that creating a flexible tech setup also supports adaptation to client needs and frees employees from repetitive tasks, thus attracting younger talent.

Panellists:
Niklas Nyberg, head of Global Custody, SEB
Hans Martin Aulie, head of Clients and Products, DNB Bank ASA
Mads Bøgh Arildsen-Walin, product owner, Danske Bank
Richard Wilson, Commercial Product Management , S&P Global


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