FINBOURNE has seen great success since it was founded almost eight years ago. What do you believe has driven this growth and what would you say have been some of the key milestones in that time?
At FINBOURNE we have always strived to build meaningful relationships with our clients. We work with them closely to deliver market-leading tools that will empower them to reach their organisational goals.
Our premise is simple — we use our open, cloud-based platform to help financial firms boost revenue, reduce costs, and manage risk more effectively, all while simplifying their operational data processes.
The success we have seen over the last eight years has been built on a deep understanding of the financial service industry, and total focus on delivering the data management and investment solutions our clients require, through consistent and relevant product development. We have built a client roster that includes some of the world’s largest and most successful financial services firms. Each new client win is a milestone in our ongoing strategy to help firms deliver efficiencies across their front, middle, and back office teams.
What do you think are some of the biggest trends impacting the asset servicing industry at the moment? How have you seen client demand evolve over recent years and how is this shaping your development strategy?
I see two macro trends impacting asset servicers. The first is a constant downward fee pressure, which is impacting their ability to maintain a healthy cost-to-income ratio. The other is the need to invest in platforms that provide them with the agility they need to service their clients efficiently and effectively.
Together, those two trends create something of a perfect storm for asset servicers. The industry has ageing technology that struggles to keep pace with demand, and the cost of changing that technology makes interoperability harder across disciplines like fund accounting, middle office, and managed data services, for example. We know that the firms that manage to execute well and transition to simpler and better core technology will find they have a significant competitive edge, not only in terms of efficiency but, critically, in their ability to quickly deliver the kinds of features and functionality that legacy technology can struggle to support.
Given all of this, firms are actively looking for new technologies and partnerships that can spur growth and ensure they keep delivering a world-class service.
Northern Trust recently chose FINBOURNE to support its digital transformation. With quality service to end clients paramount, what are some of the most important processes and considerations for clients such as Northern Trust when future proofing their data strategy?
Clients need the ability to manage their data and operational processes in a scalable and efficient manner, regardless of geography or complexity.
Northern Trust is a firm with a laser-like focus on client service. We are partnering with them to help modernise the firm’s technology to enhance client service levels and address the macro trends I mentioned previously.
All firms need more automation, as well as better and more immediate access to the accurate and timely data requirements of their customers. It is important too, that this data is delivered in the clients’ preferred channel. The days of building an SFTP or API and simply letting customers ‘consume’ from it, have gone.
Asset servicing firms need to be nimble and agile enough to meet the demands of their clients, even as those demands rise and processing times fall. Better, faster, cheaper, more nimble technology is what is needed.
How does automation and a reduction in manual intervention improve on legacy systems? Does it offer new opportunities to analyse or use the data in ways that would have been impractical before?
An overall trend in the market is that the amount of computing power on a single machine is increasing significantly. In addition, due to the proliferation of cloud service providers, the capital costs for firms are falling. This means that firms can do more with less.
However, what we also see is increased siloing across the lifecycle of a transaction. Twenty years ago, a fund accountant would work across all aspects of every single transaction. This is not the case today. Most teams work across a single channel of the process, with individuals very much being domain experts.
To be successful, firms need to lean into that trend of increased specialisation and automate even further, so that the amount of processing required goes down across a transaction, and we can reach a point where transaction management becomes exception based.
In conjunction with that, teams require the right training. Ideally, you would reduce elements of human intervention as much as possible, and when it is required, those teams should be better educated and more specialised. As you increase the automation, you also need to increase the capability of the human in the loop.
How do systems such as those offered by FINBOURNE impact a firm’s ability to develop and deploy new service lines to clients? Have you noticed any trends or patterns in this area?
FINBOURNE’s goal is to provide the tools that enable asset servicers to increase efficiency and meet their clients’ needs. We build entitlements engines, virtualisation engines, we build engines to represent core elements in financial services like bonds and payment-in-kind notes.
By building this infrastructure, we enable firms to answer questions like, ‘what do I own?’ and ‘how much is it worth?’.
We take elements of investment accounting, fund accounting, custody accounting, and transfer agency building blocks together, and drive better automation, process design and data integration. In turn, this allows firms to solve any problem they have.
We offer our customers an agility that other systems do not. Our products are fully customisable and nimble in a way that underpins our clients’ ability to efficiently launch products and expand geographically in a timely manner, while maintaining control over their cost structures. That used to be an expensive process. Our products can simplify the process and reduce those costs.
Do you think AI has, or will have, a role to play in this democratisation of data? Are there areas where you think human intervention will always be necessary, and perhaps even preferential?
I think of AI as lowering the barriers to market entry, in terms of process automation, business tasks and data insights.
This is similar to the way a modern smartphone made mobile phone use more common across a broader range of people.
AI is excellent at bringing data together and summarising it, but its application in terms of effective data dissemination is limited.
I see data democratisation as having greater access to data, or having access to more data, but arguably the stronger AI becomes, the opposite may be true.
The more value people see in their data, the more likely they are to limit access to it. Why would they allow their data to train a model, adding value to a product, if they are not going to get paid for it? We see a lot of interest in our entitlement engines and digital rights management tools and engines.
To answer the second part of the question, there will always be a place for human intervention in processes and transaction management. If you consider machine learning and AI, fundamentally they offer results based on probability models, giving you an answer within a certain confidence level.
That answer needs to be verified, and a human will have to confirm that the assumptions the model is making as it learns also remain accurate.
In addition, depending on the situation, you will have to have a human confirm that even if the answer is correct, that is relevant and appropriate.
Just because a thing is true does not mean it is helpful. In the core processing engines in financial services, I do not think AI or automation will ever reach the point where human intervention is not needed.
As a decision support system, or an outlier detection system, AI is a great place to start, but by definition it can never get to 100 per cent confidence level. If it could, it would no longer be an AI model but an exact decision tree system.
You have touched on some of the current trends impacting the industry, do you have any predictions or expectations of how things will change over the next five years?
One of the things that will have a large impact in our markets, and one that may currently be underestimated, is the emerging trend in hardware. In terms of technology hardware for example, there could be a three times increase in processing speed over the next 12 to 18 months.
That will naturally have a significant cost implication, and it will be interesting to see if that accelerates the move to the cloud.
The other trend I predict is that we will see an increased focus on tokenisation. By which I do not mean cryptocurrency, but actual tokenisation. This is already leading to legal infrastructure changes for the securitisation of assets and funds. That is an area to watch as well.
Having recently chosen FINBOURNE to aid in its digital transformation, Northern Trust Asset Servicing’s Nadia Ivanova, executive vice president and global head of business services, spoke with Asset Servicing Times about the partnership.
With this new partnership with FINBOURNE Technology, how do you see the collaboration adding even greater value for your clients?
As an asset servicer, our mission is to deliver accurate, timely and on-demand data that underpins clients’ investment programmes. FINBOURNE’s LUSID solution helps us to enhance core valuation and reporting functions, driving the client experience.
Northern Trust’s collaboration with FINBOURNE supports the less visible but essential tools that make us faster, more scalable, and nimbler in key aspects of our daily processing and delivery capabilities. Clients feel this as improved quality, flexibility and timeliness of the services we provide.
How do you see FINBOURNE’s solutions aiding your digitisation strategy and Northern Trust’s efforts to modernise your data strategy and build a digital backbone?
FINBOURNE is an exciting addition to our digitalisation journey and our Matrix Data platform. By optimising data processes and publishing that data to Matrix, FINBOURNE feeds this new digital backbone quickly and flexibly.
In addition, FINBOURNE’s technology is built specifically to accelerate the kind of modernisation journey we are undertaking. They have watched the industry try to solve these challenges for decades, and their founders and engineers have helped address these complex problems at top-tier financial institutions before.
With the benefit of hindsight and experience, FINBOURNE’s cloud-native comprehensive data model builds on those lessons learned, so we can modernise our business without requiring a platform conversion.
With a data race seemingly underway, how do you see FINBOURNE helping Northern Trust’s efforts in this arena and how do you think it will help Northern Trust stand out as best in class?
We have been very impressed by the quality of FINBOURNE’s leadership. They are capable and deeply passionate about removing friction from processes and lowering the cost of savings and investing in order to unlock value for retirees and investors. That approach creates value for everyone in financial services.
That passion translates to FINBOURNE’s tools — they provide us with a truly modern foundation for key processes.
When you add in the flexibility and extensibility of their solutions, we gain a leg-up in the data race. We can not only accommodate what clients need today, but whenever the next big trend comes, we will be able to support it faster and more easily than peers built on older frameworks.
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