Full speed ahead
13 May 2020
With an accelerating shift towards digitisation across all a sectors, especially in financial services and asset servicing, how will digital transformation change in the coming years?
Image: levchenko_ilia/shutterstock.com
Although the COVID-19 pandemic has caused heartbreak and turmoil, it has proved how important technology can be to everyone worldwide.
In light of the lockdown measures across various countries, technology has provided a platform to speak to loved ones as well as being able to work from home.
Without the vast amount of technology currently on offer, various elements of work would be impossible.
Globacap’s Myles Milston highlights that less than five years ago most institutions were still averse to using digital signatures, however now it’s almost strange if we have to print, sign and scan a document.
Milston says: “That trend will continue. The situation with COVID-19 has increased the rate of accelerating digitisation.”
“There is an accelerating shift towards digitisation across all sectors, but especially in financial services and asset servicing”, he adds. Emphasising this shift further, Yvan Mirochnikoff, head of digital solutions at Societe Generale Securities Services, says the digital transformation is “a tremendous change in our industry”, following the trend already initiated in other markets, such as retail banking and payments.
Mirochnikoff notes: “Everything is going in the same way: bringing an easy connection between clients and the business information, available in real-time and remotely, with an increased capacity to extract insights from a large volume of data.”
He explains that this is not only to produce more detailed reports or enter operations but also to interact on critical tasks, with a better knowledge of the market, to help improve performance and manage risks. Everything is now available at your fingertips, via smartphones or tablets.
Rise in digital transformation
Digital transformation is becoming increasingly popular in the way that banks interact with clients because of the opportunities and advantages it can bring over manual tasks.
Mirochnikoff breaks this down into three key aspects. The first, the capacity to collect a huge volume of data (cloud services gathering all kinds of data); second, the opportunity to interconnect all systems and devices together (with higher telecommunications and broadband capacities); and third, the development of new technologies, such as artificial intelligence (AI) and blockchain components.
“The customer experience should take advantage of these three areas to create interactive interfaces, allowing easy access to these increased capacities,” Mirochnikoff says.
In retail banking, Milston observes that the large banks have been trying to reduce their branch services for decades.
Milston explains: “It was the rise of challenger banks, however, that accelerated that journey, forcing the incumbents to also upgrade their digital services, which ultimately benefit them by reducing their reliance on human capital and physical space in branches.”
In investment banking, there has been a focus on digitising trading and settlement systems, however, there has not been as much advancement in securities distribution, according to Milston.
Something missing?
Digitalisation in the asset servicing industry has also seen the rise of chatbots, robots and AI, which aim to bring efficiency and create a powerful user experience, but does this mean clients miss face-to- face interaction?
Chatbots stimulate conversations with customers over the internet or by phone, however, they can be frustrating for users and you will often be greeted with a robot asking you to “repeat that please”.
But despite the frustrations, chatbots are continuously improving and provide the benefit of freeing up human support time. Milston cites: “Chatbots have the benefit of quicker responses, directly to users on simple requests, but also by freeing up human support staff to focus on more complex queries.”
Weighing in on this, Mirochnikoff cites: “Chatbots bring interactivity to the dialogue between our clients and dedicated platforms; the challenge is to specify a business perimeter, where any question may find an answer, and to create a learning capacity to improve the quality of the answers.”
Meanwhile, robots (such as RPA) are providing the industry with huge capacity to automate processes, which Mirochnikoff says are the backbone of our industry, but they are limited to stable activities. “The challenge might be to combine robots and machine learning to dynamically change the process.”
“Finally, AI is leading the area of processing the data in order to give insights to the asset managers and other finance experts. The challenge is to continue creating and developing powerful models and engines,” Mirochnikoff says.
With the increase of digital platforms, people may miss the face-to-face interaction, although people have come to expect this in most industries. COVID-19 has also heightened this void of face-to-face interaction.
However, Mirochnikoff stipulates that digital platforms and face-to-face interaction are not mutually exclusive considering the new communication means that have developed with clients, either through messaging systems or via remote solutions. COVID-19 has also dramatically increased the usage and the necessity of such platforms.
Mirochnikoff adds: “Of course, digital solutions do not replace human interactions, but we are entering a period with a digital-native generation, able to work and interact from any place in the world. So, we just have to provide the right solutions to combine systems and real-time interactions. The progress done on vocal interfaces is a good trigger to change our way to communicate and interact.”
Out with the old, in with the new
Digital platforms can be costly and take a while to implement. Large companies may in a sense be at a disadvantage when it comes to the migration to new platforms and are still using legacy systems. Whereas newer players in the space have the upper-hand of being able to start from scratch and create something new.
Milston explains: “Cost and time is the major factor. It can be very complicated to replace legacy systems, particularly after decades of use and where the original architects and engineers that built the systems are no longer at the firm. Often there is a web of complexity where those systems interact with other systems, and all of those interactions, channels, operational systems, and so on would have to be rebuilt, and staff re-trained.”
Echoing this, Mirochnikoff highlights that banks and asset servicers have invested for more than 30 years in their IT environments.
“Completely replacing this legacy is not the easiest, nor cheapest, way to manage its transformation. One preference is to develop open architectures, with APIs, providing the ability to interconnect the legacy applications with modern user interfaces, for an enhanced digital experience. “
“The question remains, therefore, how to decouple the layers of this architecture and connect them with additional components, provided, for instance, by partners and fintechs. This is what has been done at an SG level with the implementation of the SG Market platform.”
“This is where fintechs and challenger banks have a significant advantage - we’re starting with cutting-edge, future-proofed systems,” Milston adds.
Looking to the future and how digital platforms will develop over the next five years, Milston predicts we will see continued acceleration of digitisation.
Globacap’s platform provides entirely automated, digital registrar services, offering asset issuers and investors is a more cost-effective, easier approach to managing and interacting with their assets.
Illustrating the demand for digital services, Milston says that since launching in May 2019, Globacap is now providing this service to just over $250 million of private securities and growing fast.
“Therefore we will definitely see a continued acceleration towards digital services. Asset servicing firms have an opportunity to adapt and capitalise on the new normal, however, they do have to move quickly since firms like ours are closing in,” Milston says.
While every large firm has developed a digital platform in the wholesale banking industry, Mirochnikoff says it is too early to see whether a common and unique platform will emerge for all businesses.
However, dedicated platforms per market (trade services, securities) may converge when actors share a common interest or a technological asset (such as blockchain), according to Mirochnikoff.
“We need a common regulatory framework to allow and ease this convergence. In the meanwhile, clients can continue to access their preferred providers via common standard protocols or APIs, through interconnecting IT environments.”
“The major change will be the capacity to extract added value from the huge amount of data we are daily managing and collecting,” Mirochnikoff concludes.
In light of the lockdown measures across various countries, technology has provided a platform to speak to loved ones as well as being able to work from home.
Without the vast amount of technology currently on offer, various elements of work would be impossible.
Globacap’s Myles Milston highlights that less than five years ago most institutions were still averse to using digital signatures, however now it’s almost strange if we have to print, sign and scan a document.
Milston says: “That trend will continue. The situation with COVID-19 has increased the rate of accelerating digitisation.”
“There is an accelerating shift towards digitisation across all sectors, but especially in financial services and asset servicing”, he adds. Emphasising this shift further, Yvan Mirochnikoff, head of digital solutions at Societe Generale Securities Services, says the digital transformation is “a tremendous change in our industry”, following the trend already initiated in other markets, such as retail banking and payments.
Mirochnikoff notes: “Everything is going in the same way: bringing an easy connection between clients and the business information, available in real-time and remotely, with an increased capacity to extract insights from a large volume of data.”
He explains that this is not only to produce more detailed reports or enter operations but also to interact on critical tasks, with a better knowledge of the market, to help improve performance and manage risks. Everything is now available at your fingertips, via smartphones or tablets.
Rise in digital transformation
Digital transformation is becoming increasingly popular in the way that banks interact with clients because of the opportunities and advantages it can bring over manual tasks.
Mirochnikoff breaks this down into three key aspects. The first, the capacity to collect a huge volume of data (cloud services gathering all kinds of data); second, the opportunity to interconnect all systems and devices together (with higher telecommunications and broadband capacities); and third, the development of new technologies, such as artificial intelligence (AI) and blockchain components.
“The customer experience should take advantage of these three areas to create interactive interfaces, allowing easy access to these increased capacities,” Mirochnikoff says.
In retail banking, Milston observes that the large banks have been trying to reduce their branch services for decades.
Milston explains: “It was the rise of challenger banks, however, that accelerated that journey, forcing the incumbents to also upgrade their digital services, which ultimately benefit them by reducing their reliance on human capital and physical space in branches.”
In investment banking, there has been a focus on digitising trading and settlement systems, however, there has not been as much advancement in securities distribution, according to Milston.
Something missing?
Digitalisation in the asset servicing industry has also seen the rise of chatbots, robots and AI, which aim to bring efficiency and create a powerful user experience, but does this mean clients miss face-to- face interaction?
Chatbots stimulate conversations with customers over the internet or by phone, however, they can be frustrating for users and you will often be greeted with a robot asking you to “repeat that please”.
But despite the frustrations, chatbots are continuously improving and provide the benefit of freeing up human support time. Milston cites: “Chatbots have the benefit of quicker responses, directly to users on simple requests, but also by freeing up human support staff to focus on more complex queries.”
Weighing in on this, Mirochnikoff cites: “Chatbots bring interactivity to the dialogue between our clients and dedicated platforms; the challenge is to specify a business perimeter, where any question may find an answer, and to create a learning capacity to improve the quality of the answers.”
Meanwhile, robots (such as RPA) are providing the industry with huge capacity to automate processes, which Mirochnikoff says are the backbone of our industry, but they are limited to stable activities. “The challenge might be to combine robots and machine learning to dynamically change the process.”
“Finally, AI is leading the area of processing the data in order to give insights to the asset managers and other finance experts. The challenge is to continue creating and developing powerful models and engines,” Mirochnikoff says.
With the increase of digital platforms, people may miss the face-to-face interaction, although people have come to expect this in most industries. COVID-19 has also heightened this void of face-to-face interaction.
However, Mirochnikoff stipulates that digital platforms and face-to-face interaction are not mutually exclusive considering the new communication means that have developed with clients, either through messaging systems or via remote solutions. COVID-19 has also dramatically increased the usage and the necessity of such platforms.
Mirochnikoff adds: “Of course, digital solutions do not replace human interactions, but we are entering a period with a digital-native generation, able to work and interact from any place in the world. So, we just have to provide the right solutions to combine systems and real-time interactions. The progress done on vocal interfaces is a good trigger to change our way to communicate and interact.”
Out with the old, in with the new
Digital platforms can be costly and take a while to implement. Large companies may in a sense be at a disadvantage when it comes to the migration to new platforms and are still using legacy systems. Whereas newer players in the space have the upper-hand of being able to start from scratch and create something new.
Milston explains: “Cost and time is the major factor. It can be very complicated to replace legacy systems, particularly after decades of use and where the original architects and engineers that built the systems are no longer at the firm. Often there is a web of complexity where those systems interact with other systems, and all of those interactions, channels, operational systems, and so on would have to be rebuilt, and staff re-trained.”
Echoing this, Mirochnikoff highlights that banks and asset servicers have invested for more than 30 years in their IT environments.
“Completely replacing this legacy is not the easiest, nor cheapest, way to manage its transformation. One preference is to develop open architectures, with APIs, providing the ability to interconnect the legacy applications with modern user interfaces, for an enhanced digital experience. “
“The question remains, therefore, how to decouple the layers of this architecture and connect them with additional components, provided, for instance, by partners and fintechs. This is what has been done at an SG level with the implementation of the SG Market platform.”
“This is where fintechs and challenger banks have a significant advantage - we’re starting with cutting-edge, future-proofed systems,” Milston adds.
Looking to the future and how digital platforms will develop over the next five years, Milston predicts we will see continued acceleration of digitisation.
Globacap’s platform provides entirely automated, digital registrar services, offering asset issuers and investors is a more cost-effective, easier approach to managing and interacting with their assets.
Illustrating the demand for digital services, Milston says that since launching in May 2019, Globacap is now providing this service to just over $250 million of private securities and growing fast.
“Therefore we will definitely see a continued acceleration towards digital services. Asset servicing firms have an opportunity to adapt and capitalise on the new normal, however, they do have to move quickly since firms like ours are closing in,” Milston says.
While every large firm has developed a digital platform in the wholesale banking industry, Mirochnikoff says it is too early to see whether a common and unique platform will emerge for all businesses.
However, dedicated platforms per market (trade services, securities) may converge when actors share a common interest or a technological asset (such as blockchain), according to Mirochnikoff.
“We need a common regulatory framework to allow and ease this convergence. In the meanwhile, clients can continue to access their preferred providers via common standard protocols or APIs, through interconnecting IT environments.”
“The major change will be the capacity to extract added value from the huge amount of data we are daily managing and collecting,” Mirochnikoff concludes.
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