New research from SIX Securities Services has found that 67% of respondents believe that post-trade service providers will need to focus on new service creation and revenue opportunities by 2027, if they are to continue creating value beyond being “simply operational”. The research, conducted through an independent research company, reveals that this “hunt for value” should not just center on liquidity provision, efficiency, and risk mitigation.
63% of respondents identified Robotic Process Automation (RPA) and Artificial Intelligence (AI) as the technology that has the potential to provide the greatest value, followed by Distributed Ledger Technology (DLT, 57%), cryptocurrencies (50%) and Application Programming Interfaces (APIs, 37%).
The threat from smaller, more agile Fintech companies is clear: 37% of respondents say their organization is “highly likely” to move to a Fintech provider for at least one post-trade service by 2027. This forecast is strongest amongst asset management companies, for whom this figure soars to 60%. The three key attractions of a Fintech company are that they are perceived to be more nimble, and therefore able to respond to client needs more quickly, as well as the ability to think from a more innovative perspective. Fintech companies are also viewed as having a different skill set in their employees that enables them to generate more value-creating services.
To achieve the same level of innovation, 43% of respondents believe that post-trade service providers will need to partner with other companies. 53% of respondents point to the need to hire different kinds of talent from outside the industry if they are to retain clients. Counterbalancing these perspectives, 37% of respondents highlight that a mixture of both technological and financial knowledge will be required to secure future value provision, bringing together a detailed understanding of the landscape and the skills to create new solutions.
Valerio Roncone, Head Markets & Clients, Member of the Management Committee, SIX Securities Services, comments on the findings: “Today, the aim of any effective post-trade service provider should be to develop the capabilities to solve problems and create real value coherently across the entire market. This new research confirms our belief in the way we are approaching industry challenges and addressing our clients’ pain points: We have already developed a package of value-added solutions – Advanced Services – which help financial institutions significantly reduce their operational complexity as well as operational risks, and eliminate redundancies within a given end-to-end process chain. And we are committed to enhancing this package to ensure that we continue to create sustainable value for our clients, and our clients’ clients – the end investors.”
In September and October 2017, the study surveyed 60 decision makers at financial institutions in the US, the UK, Germany and Switzerland. 30 respondents came from asset management firms, while 30 came from more traditional banks (including custodian banks).