GC: There has been much talk of securities services learning from other businesses. One is the Amazon model of retail transaction and order fulfilment, but can that serve as an example for wholesale securities transactions?
Fiona Gallagher: There is much to consider when comparing retail models to the securities services industry. I think, however, that the experience people have in their personal lives begins to impact the transaction banking experience that they demand.
Clients like and need ease of access, standardised interfaces, standardised rules, safety, certainty and speed. When, for example, you’re looking for something on eBay or Amazon, they have massive search engines that go into the cloud to see what products they have. A lot of those tools respond in less than a second and could help us look across all of the various systems that we as custodians and financial institutions have. That makes us much more efficient.
People often think about transaction banking as being this kind of massive, quite clunky operation with a huge amount of data and information that’s hard to extract. My experience over the last couple of years though is that clients are beginning to demand an instant view, an instant ability to search with regards to everything touching transaction banking.
If you think about Amazon, when you go to place an order it’s not necessarily the most attractive page on the web, but it’s very practical. Similarly, when we think about trying to help our clients to self-serve, the experience doesn’t need to be absolutely super and shiny. But if it’s really quick, then we have a good chance of meeting their expectations.
A couple of years ago we hired a number of tech and data experts from the retail world with a real experience of what’s driving the retail side of things. That has helped us leapfrog what we’d previously been able to do, not because we’re coming up with new and funky technology, but rather because we’ve been looking into the retail space and saying, “what are they using to drive the response times they’re experiencing?”
That’s not to say that there won’t be challenges because of course there will be. Change to market infrastructure tends to be a long process with large scale projects spanning many years.
We need to tackle the challenges head on as an industry and as institutions and not shy away from them. Technologies such as DLT, AI and cloud-based services could improve the collection, management and distribution of information with the potential to deliver new post-trade processes that are much more efficient and effective.
Of course, for the securities sector there will need to be asset safety rules, account naming, beneficial owner transparency, capital and liquidity management to name but a few– but this can be accommodated. A focus on investor protection, timeliness, speed and efficiency, uniformity and standardised market practice should be the foundation.
GC: To realise this vision, both for Deutsche Bank and the broader industry, are the appropriate human resources available or is there a job to be done in nurturing the right talent?
FG: Deutsche Bank recognises people as an asset and a real business differentiator of ever increasing significance in such a competitive landscape. As the product and technology profile of the industry evolves, we recognise that the skill mix that we need in the workforce to succeed in to the future is different from that of the past. There is a high demand for staff that are qualified and skilled in technology.
Our operating hubs align to local expertise. Dublin, for example, is for us a fantastic centre of excellence. Our data lab is based there and the availability of highly qualified data scientists and engineers is unparalleled.
As an institution we invest heavily in introducing and nurturing new talent. We operate a graduate programme through which some of our rising stars have advanced.
We need to bring creators and users of data and services together so we can bring the voice of the client, the voice of the industry and the voice of the regulators together. We recognise each skillset as being fundamental to realise our vision and growth.
GC: In a commercial sense, do you see the competitive landscape changing in the next few years?
FG: It already has and it will only become more competitive. The industry is experiencing changes to operating models, primarily driven by the way that technology will change the pre- and post-trade environment.
The key is to decide where in the value chain you want to be and to work with trusted partners to drive value, efficiency, relevance and trust to clients.
There is and always has been competition. It keeps you on your toes. Questions I always ask are: how can we grow our business? How can we be operationally more efficient? How can we further excel in our client servicing? As the environment becomes more complex, driven by client demand and regulatory imperatives it is more important than ever to be clear on what we do and how we do it.
GC: Speaking to your peers, do you get a sense that everyone is thinking along the same lines or looking for ways to differentiate other than by doing the same things better?
FG: We are always looking and will continue to look for ways to differentiate from each other but, yes, I think there is broad alignment across the peer group. There appears to be agreement that the role of the custodian will evolve although how each institution handles this will be different, which promotes choice to the client.
GC: T2S is back in the news with further access reforms and forthcoming collateral management initiatives. Putting aside the by-product of harmonisation, do you see T2S as a success from your clients’ perspective? In the years ahead, where are the biggest gains to be had in the ongoing Target project?
FG: It’s easy to focus on the length and expense of the project, but it’s still brought a level of consistency and connectivity that we shouldn’t ignore. For Deutsche Bank, T2S was a catalyst for an innovative progression of our product suite, including ‘account operator’ and asset servicing only’ models. The ability to create new products and services with the client at the core was a success for our clients. Like us, T2S has given our clients firm foundations to build on.
In the years ahead, we want to see cross-CSD settlement and volume on the platform. Getting new markets and more currencies onto T2S is essential and will achieve the much-needed economies of scale to bring the price per settlement down and help to convince non-European investors to consolidate their assets in T2S markets.
Target 2 and T2S integration is a focus for us at the moment. The opportunity to pool our clients’ assets across the markets we operate in will create opportunities to work more closely with our cash management arm. Meanwhile, the ECMS [European Collateral Management System] platform due to go live in 2022 will harmonise collateral management across central banks, but also intra-banks – this is also on our radar.