The asset servicing industry stands at a pivotal moment. Signals point to a powerful wave of technology disruption poised to reshape the landscape. This isn’t merely about incremental change; it’s a fundamental shift demanding agility, foresight, and a willingness to embrace the future. Asset servicers must navigate not only evolving regulations but also the complexities of globalisation, the emergence of new asset classes, and the ever-increasing expectations of clients. The Mission, should it be accepted: adapt, or risk being left behind.
By Alan Goodrich, ERI
Globalisation and the shifting sands of complexity
The globalisation of financial markets has created both opportunities and challenges for asset servicers. Luxembourg funds, for example, are now sold into more than 75 countries worldwide, requiring servicers to navigate a maze of regulatory frameworks and reporting requirements. Simultaneously, new asset classes are emerging, each with its own characteristics and servicing needs. This increased complexity demands sophisticated technology, specialised expertise, and a global perspective.
Technology as the engine of transformation
To thrive in this dynamic environment, asset servicers must leverage technology to its fullest potential. This goes beyond simply automating existing processes, which remains a key challenge. It requires a fundamental rethinking of how services are delivered, with a focus on efficiency, transparency, and real-time data. The integration of artificial intelligence (AI) will be critical in optimising resource allocation, enhancing decision-making, and providing clients with a personalised experience. The asset servicing organisations that successfully harness the power of technology will be best positioned to capture market share and deliver superior value.
Unveiling the pain points
The challenges and priorities of asset servicing industry participants paint a clear picture of an industry grappling with legacy systems, manual processes, and a growing need for digital transformation.
1. The burden of manual processes: Across the board, institutions cite manual processes as their biggest challenge, underscoring the urgent need for automation and process optimisation. These manual processes are not only inefficient but also further increase the risk of errors and delays.
2. The quest for integrated platforms: The observed shift from fragmented point solutions to centralised end-to-end platforms reflects a growing recognition that siloed systems are no longer adequate. Integrated platforms offer a holistic view of client data, enable seamless workflows, a single source of the truth, and improve overall efficiency.
3. Navigating the payback period: The typical digital transformation payback period of 2 to 3 years highlights the importance of carefully planning and executing technology investments. Asset servicers must prioritise projects that offer the greatest potential for return on investment and ensure that they have the resources and expertise to implement them successfully.
4. Operational excellence as a cornerstone: The continued focus on operational improvements demonstrates a commitment to efficiency and client satisfaction. Addressing manual processes and improving client onboarding are critical to delivering a seamless and positive experience.
5. Data as a strategic asset: The recognition of data as a crucial area for investment and the identification of AI and workflow automation as key technologies underscores the importance of data-driven decision-making and intelligent automation. Asset servicers must invest in the infrastructure and expertise needed to capture, analyse, and leverage data to improve operational performance and deliver value-added services.
Furthermore, the emphasis is on the need for a coordinated digital strategy to overcome the limitations of fragmented point solutions. A piecemeal approach to technology implementation is unlikely to deliver the desired results. Instead, asset servicers must develop a comprehensive digital roadmap that aligns with their overall business strategy.
Corroborating evidence
These trends reinforce the importance of real-time data, self-service models, and operational technology.
1. The demand for real-time insights: Almost all institutions intend to focus on real-time data and self-serve models. This reflects a growing demand for transparency and control. Clients want to be able to access their data in real-time, perform their own analyses and collaborate digitally when taking decisions, e.g. elective or voluntary events (corporate actions).
2. Operational technology as a priority: Current innovation initiatives are focused on enhancing operational efficiency by automating manual processes. The digitalisation of key services is also a strategic priority, aimed at improving client retention while simultaneously reducing operating costs.
Digital transformation: a strategic imperative for survival and success
The confluence of these trends presents both challenges and opportunities for asset servicers. To not just survive but thrive in this evolving landscape, they must adopt a proactive and strategic approach.
1. Cultivating a digital-first mindset: This requires a fundamental shift in organisational culture, with a focus on innovation, agility, and a willingness to implement new core technology platforms.
2. Strategic allocation of resources: Securing funding for necessary investments with realistic payback expectations is crucial for long-term success. This requires a clear understanding of the costs and benefits of technology investments and a commitment to prioritising projects that offer the greatest potential for return in the future.
3. Empowering clients with transparency and control: This can be achieved through the delivery of self-service portals, real-time reporting dashboards, and other tools that give clients greater visibility into their assets and transactions, as well as data-driven insights. But this is only possible if the underlying core system offers access to real-time data and business services through a comprehensive suite of Open APIs.
4. Bridging the expectations gap: By proactively communicating with clients and delivering value-added services, asset servicers can strengthen and expand their relationships and build trust.
Conclusion: accept & accomplish the mission
The asset servicing industry is facing a period of unprecedented change – the digital day of reckoning is fast approaching. By embracing technology, streamlining operations, and focusing on client needs, asset servicers can not only survive but also thrive in the evolving landscape. The journey requires a commitment to change, a willingness to adapt, and invest, with a clear vision for the future. It may seem hard, but it is not impossible. The mission can be accomplished, especially with the right core system.
Alan Goodrich
Regional Sales Manager at ERI
Fellow of the IAP (Institution of Analysts & Programmers)
Alan has 30+ years of experience in finance and technology, with expertise as a Fellow of the Institution of Analysts and Programmers and a General Registered Representative of The Securities Association. He’s held senior roles in leading financial firms and technology suppliers. Currently, he serves as Regional Sales Manager at ERI, overseeing Benelux, Nordic, Baltic, and SEE territories.
ERI is the supplier of the OLYMPIC Banking System, offering award-winning levels of innovation, real-time securities processing automation and compliance.