BNY Mellon’s new chief executive will increase technology spending by $300 million in 2018, as he looks to transform the traditional custody business to fit a new digital age.
In his first investor day, Charlie Scharf, the former Visa chief executive, highlighted the technological changes he will look to implement throughout the various BNY Mellon businesses.
Scharf said the bank currently spends $2.4 billion on technology annually, but aims to increase its spending to $2.7 billion in 2018.
“What we are actively working on is making sure we capture everything on a digital basis and then process on a straight-through basis,” said Scharf.
“The number of faxes we still receive and the manual reconciliations we have is extraordinary, and the tools we have to automate today is more than there ever has been.”
Of the further $300 million that will go into its 2018 technology budget, three quarters will be spent on BNY Mellon’s operating platform and on cyber security. Going forward, Scharf aims to devote over half of technology spending on product development.
“We want to make sure we have the best operating platform in the business, and so for me that is priority number one…. We are spending a tremendous amount on development and on our operating model,” Scharf added.
“You have to have strong operating platforms so that it turns from not just being a commodity, but a strength.”
A large part of BNY Mellon’s effort to improve its operating model has been the development of NEXEN, its cloud-based technology platform that is used across all of its businesses.
It has since implemented functions to allow uniform access to the NEXEN platform, which included its Gateway programme, as well as its private cloud platform BxP and the adoption of application programme interfaces (APIs).
BNY Mellon has also made several short-term investments on its data centres, improving its network architecture and consolidating its technology platform.
Scharf said its longer-term investments include enhancing its blockchain capabilities, introducing digital market solutions for collateral and financing, and introducing componentised solutions and APIs for asset servicing solutions.
“We have to be thinking about the future, a lot of it is digital and lot of it are product extensions that are based upon digital capabilities,” said Scharf.
“We are doing work both internally to build those capabilities but also with outside partners and we are completely open to building those relationships and doing more things with those outside partners.”
Hani Kablawi, CEO of BNY Mellon’s asset servicing business, added at the investor day that the business has kicked off a multi-year automation project by increasing its digital intake of data and deploying machine learning.
Kablawi also highlighted the business will look to integrate with Eagle Investment Services, the technology and data vendor acquired by Mellon Financial in 2001.
“We are not talking about big data but data our clients need to manage their investments every day. Our data solutions come from BNY Mellon Eagle. We are incorporating the technology into our core asset servicing solutions such as fund accounting and middle-office outsourcing,” said Kablawi.
“We see the opportunities as threefold; first introducing our asset servicing capabilities to Eagle’s clients that aren’t using us today, second introducing Eagle data solutions to asset servicing clients that are not using Eagle as their data backbone today, and third replacing our third-party vendor technology with Eagle’s so its technology is at the core of what BNY Mellon asset servicing does.”