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The current wave of collaborations and partnerships with FinTechs and other incumbents is likely to continue, as experts believe industry-wide projects will shape the securities services model going forward.
Partnerships with FinTechs, data vendors, and other third-party providers have become prevalent in areas such as front-to-back services, proxy voting and asset servicing, digital assets, and ESG data services.
Day Three of Global Custodian’s Leaders in Custody Week showcased a panel discussion on this growing trend, in which participants explained these partnerships have been fuelled by client demand to provide them with new capabilities and help them navigate the changing investment environment.
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“We are seeing client demand drive this strategy. We have recognised that the companies we are working with have developed very strong capabilities, they have created a lot of value with the work they have developed, and there are now some very good tools in the market,” said Noam Tasch, global head of digital partnerships, BNY Mellon.
“What we have committed to is getting those tools into our clients’ hands in whatever channel makes the most sense.”
What has also driven these collaborative moves has been a change of mindset between securities services firms, where many have realised that they no longer need to develop and carry out functions exclusively.
“The industry has realised there are better solutions are available through collaboration, and doing it all in-house yourself is a thing of the past. Client requirements are stepping up, and it is incumbent on us as an industry to look to collaborate with partners, be it with small FinTechs or potentially with our competitors,” added Emma Crabtree, head of sales, EMEA asset managers, asset owners and alternatives, BNP Paribas Securities Services.
Panelists also explained that the similarity of alliances between custodians and other post-trade providers has also suggested the objectives of the industry are becoming more closely aligned with client interests.
“All of us are striving and trying to achieve scale, efficiency, growth, and keeping technology at the forefront to enable us to drive to that common set of objectives. We have all been able to align our goals, which will lead to a greater level of collaboration,” outlined Pervaiz Panjwani, head of custody and fund services, EMEA, Citi.
The growing move to collaborate with start-ups in securities services is also a reflection of the evolution of the FinTech space over the past decade. Solutions that were once used mostly for the payments sector are now becoming tailored for asset servicing, custody and fund administration, paving the way for greater industry partnerships.
“Traditionally in the custody sector, FinTech focused in the area of payments going all the way back to the 1980s with the advent of SWIFT. Now we see that initial focus has moved on and developed massively over time to deliver efficiencies in the entire digital post-trade environment,” added Brendan Toolan, global head of depository and network management, MUFG Investor Services.
Going forward, providers will look to sustain these partnerships as they have become vital to retaining and winning new business.
Recent mandate announcements from some of the largest custodians have hinted that partnerships with third-party vendors to access real-time data and cloud technology capabilities have played a crucial role in winning the client in question.
“We have had some situations where we have won business because of our ability to integrate with a third-party partner. Even if these partnerships do not directly contribute towards revenue, they are helping us to win deals. We are accessing big tech and making it available to our clients, and that is helping us to win clients,” said JR Lowry, chief operating officer, State Street Alpha.
For the long-term, panellists agreed that everyone involved in the investment ecosystem, including clients, securities services providers and the FinTech community will have to keep their values aligned.
In order to do this, market participants will have to keep up these efforts and maintain a culture of collaboration.
“We have to keep an open mind and ensure the client needs are met, whether it is your own solution or a solution with the help of collaboration. The ultimate goal is future proofing, and that is where we need to bring the technology, digitisation and the open architecture approach. If we do this, it will be embedded in our culture,” added Citi’s Panjwani.