Giles Elliott, Head of Business Development, Capital Markets, TCS BaNCS
For many firms, asset servicing operating models are the most complex in their domain. There are a few themes that play into this – the seasonal nature of event management gives headaches in capacity management, both in terms of operations teams and system capacity, while the inherent built-in risk concerns often drive models with high levels of duplication in data sourcing and processing in an area that still lacks consistent market practices. And regulations like SRD II are placing even more emphasis on timely processing and greater shareholder disclosures, further challenging these existing operating models.
However, we are seeing a shift in total operating cost models largely driven by the advent of cloud-based asset servicing solutions.
Cloud itself brings options to rationalize server capacity, where elasticity blends itself very neatly to the seasonal characteristics of the asset servicing model. In our experience the average server usage on corporate actions systems is often 20-30% of the seasonal peak needs, emphasising the benefits of a cloud based, cloud native solution.
We are also seeing many data vendors using the cloud to host market data and analytical workbenches and reduce the amount of reference data held on client systems. This is quite nascent, but in an area where multiple sources of highly duplicated data are sourced, this also provides options to cut costs.
The corporate actions area has suffered from low levels of automation, with strong opportunities in data normalization, automated data validation and core processing to massively reduce existing headcount levels. The drivers behind this leap in automation is extremely firm dependent, but the latest technology solutions provide highly configurable systems that can translate and normalize data very effectively, or Machine Learning tools to semi-automate recurring challenges in processing.
We also see the use of AI based tools to automate digital extraction from manual documents as a key benefit across the asset servicing domain, and while these do require periods of system training – our own insights are that there are notable benefits from investing in these areas.
ISO 20022 is often in the spotlight and the assessment of benefits versus ISO 15022. But the expanded use of APIs is changing the business case analysis – where the benefits of aligning data models between players that are actively exchanging broader sets of data will be very clear, and industry groups are focusing heavily on driving this thread in asset servicing. And DLT will also play a role, initially to reduce the multiple versions of truth in the reference data, but also as this evolves to leverage the smart contract capabilities to automate key decisions, especially in instruction default scenarios.
We are also seeing a move towards stronger internal and market utilities as firms scrutinize the areas that they feel need to be retained in their own bespoke operation, versus a firm-wide utility or even a market utility. Corporate event announcements processing is an obvious area to consider, but this is certainly viable across the corporate actions operating model, and we see many firms accelerating programs to review models and use of utilities for asset servicing.
But there is little doubt that having the very latest version of systems will always be beneficial to operating costs, ensuring that the latest innovative tools and latest optimized configurations of systems will position the firm at the higher end of operating model performance. And we see the shift to cloud as a major facilitator of this changing in systems approach.
The TCS BaNCS Cloud for Asset Servicing is providing clients with many tools to enhance their operating costs models, drawing on the benefits of cloud-based deployment and updates and a far stronger server capacity solution. We are including our very latest tools and use of AI and Machine Learning in these capabilities, ensuring a highly effective and future proofed solution.
Disclaimer: Views or opinions represented in this blog are based on the author’s own research and do not represent TCS BaNCS.