Fund managers are increasingly talking about their use of artificial intelligence, machine learning, big data and distributed ledger technology (blockchain) to transform their businesses and subsequently their value-add to big super funds. The real action, though, is happening at the securities services end of the food chain.
Securities services companies, which are mainly very big banks, have always spent a lot of money on trying to automate their processes. Now, with the advances of the past couple of years, they are widening their range of services. What everyone used to think of as a “custodian” is becoming much more than that. Custody will always represent the nuts and bolts. The interesting new services are where the real benefits will be for super funds and other clients.
According to Philippe Benoit, the head of BNP Paribas Securities Services for the Asia-Pacific region, securities services companies, such as his, are leveraging new tools for new services for their own businesses and those of their clients.
“We are co-designing with our clients a range of data services and data aggregation capabilities,” he said last week on a visit to Australia from his Hong Kong office. “We have a unique model within our industry.”
Last week the third annual BNP Paribas/Investment News NZ (IN NZ) industry survey also found ‘data and technology’ ranked as the top equal concern for the local funds market along with regulation.
NZ fund managers and asset owners were looking for data and technological solutions to provide wide-ranging efficiencies, manage risks, improve reporting and support opportunities such as environmental, social and governance (ESG) investing, the survey found.
Benoit, a former CFO at BNP Paribas in Paris who has been in Hong Kong for three years, says that the use of new technologies also requires a cultural transformation and a new way of working. It needs to involve a “bottom-up” approach, he says.
By this he means that, with BNP Paribas, for instance, it manages to be both global and local and almost everything it does is within its own network. “We develop our services off the back of the local capabilities, which is smartest and quicker,” he says. “We are a local clearer in 27 markets. About 90 per cent of the assets we service are within our own network.”
In terms of the firm’s commitment to investing in technology, Benoit points to the disclosed plan for the BNP Paribas group to invest three billion euro (A$4.8 billion) between 2016 and 2020 in a “digital plan”. This is money on top of the usual annual tech spend on a business-as-usual basis.
The three main aims, adjoined to the plan, he says, are:
. to improve both the customer and the employee experience
. to “industrialise” the processes for maximum efficiency and become “an industry within the banking world”, and
. to build the services of tomorrow, as more and more “new actors” come into the market.
BNP Paribas recently surveyed all its employees in the region to try to get their best ideas. They selected 15 ideas, from groups and individuals, and then distilled these down to five, after a big analysis session in Singapore. Those five then went to Paris headquarters to discuss the ideas.
“We are trying to enjoin everyone on this journey,” Benoit says. “We think we are in a better shape to exploit our data access and management and bring it back to the client in a meaningful way.”
He says there is a “generation effect” in the securities servicing industry, whereby everyone has to adapt to the changes and understand the new generation coming through.
Benoit’s remit also includes mainland China, the future of which he is a firm believer notwithstanding the current trade war with the US. By about 2030 it is clear China will become the largest economy in the world, he says, and there is a clear trend for it to deregulate its markets and open them up to more and more foreign participation.
In Australia, BNP Paribas has introduced its first robot into the securities services operation, which the staff have named “Bob the Bot”. Bob is the new “team member” in corporate actions, helping process more data and more efficiently.
In Australia, too, the firm may move up to the number two securities servicing company by assets within a year or so, after it transitions the estimated $30 billion in Suncorp assets from NAB Asset Servicing to its own platform after a competitive tender run by Mercer Sentinel. At the moment, according to figures from the Australian Custodial Services Association, the rankings go: JP Morgan first, NAB second and BNP Paribas third.
Greg Bright is publisher of Investor Strategy News (Australia)