How has the asset servicing industry developed over the last 12 months across the Europe, the Middle East, and Africa (EMEA) region?
In the last 12 months, we have seen significant change in the market in terms of regulation. We heard a lot about its impact on the market at the FundForum conference in June. The second Markets in Financial Instruments Directive (MiFID II) is forcing transparency and encouraging institutions to look at new technology solutions to help them create a more transparent environment for their clients and end-investors.
The industry has to start thinking differently and this is something that I discussed with many people at FundForum.
At the forefront of those conversations has been artificial intelligence (AI), digitisation and distributed ledger technology (DLT). Cryptocurrency is likely to be one of the top conversations over the coming year. The future for asset services? It will probably revolve around data and providing data.
There may also be more consolidation in the industry as we move forward.
What trends are you seeing in the servicing asset classes space?
New and different assets in the search for yield.
As was frequently discussed at FundForum, many portfolios are moving away from traditional assets towards private markets and alternative assets.
To service the various different types of asset classes effectively, we are constantly thinking about how asset classes will change in the future, about investors’ needs, about asset managers’ and institutions’ changing priorities.
For example, at a particularly popular session on exchange-traded funds (ETFs) at FundForum chaired by BNY Mellon’s Scott Coey, the topic was quantifying the growth of ETFs in Europe and their opportunities and risks for the markets and its participants.
How is digitisation and technology affecting the asset servicing industry?
Technology is a big disruptor. We need to be cognisant of our disruptors and how we can improve upon the client experience.
Clients may think they are delighted until the next big thing comes to market. We cannot sit still because disruptors will come in.
Financial technology, cryptocurrency, DLT and AI have the potential to create a lot of efficiency and different perspectives.
AI can be carried out wherever you are in the world. It changes the whole environment and the ability to do things.
It doesn’t matter where you are, you can be in the cloud and deliver. Therefore, if you are not at that forefront and if you are not thinking that way and changing your mindset then you are going to fall behind. That’s why we are making a considerable investment in technology.
We usually spend $2.4 billion a year on technology—this year it is increasing by around $300 million.
Another important factor from a technology point of view is that you have to have your foundation right but then you also have to invest for the future.
You need to protect your foundation and you need to think about where you take it and how you take it in terms of where the market is going.
The key to this will be attracting the right talent. As discussed at the FundForum panel on data science-chaired by BNY Mellon’s Daron Pearce, data scientists are going to play an increasingly important role across the asset management industry and most big asset managers see attracting talent in this area as critical to their success.
Are you seeing any asset servicing growth opportunities in EMEA?
A key area is distribution. US and Asian firms are coming into Europe for distribution and looking to capture that wealth.
Another opportunity is real estate, private equity, and infrastructure where we are seeing a lot of activity.
Thirdly, the US is only just waking up to Brexit and the question remains: what are US houses going to do as they look to distribute into Europe? Do they currently have the right balance of infrastructure between continental Europe and the UK?
What challenges are financial services firms facing across the EMEA region? And how is regulation having an effect?
Regulations inevitably push up costs. For us, regulatory technology is one way forward to ensure that we and our clients can remain on top of those regulations in an efficient and effective way.
What are your predictions for the next five years? What trends do you expect to see?
We will see consolidation in the market, driven by regulation and the investment needed.
Once there is more clarity with Brexit the consolidation play will take place to create more substantive European players.
Technology will clearly be a major driver in the next few years. It is important to remember that you cannot stand still with technology—it will continue to evolve and disrupt, creating new challenges and opportunities to provide a more efficient and enhanced service.
