In a market where margins are dropping precipitously and regulation is hobbling revenues, the temptation for the post-trade industry to supplant costly manual processes with robotic or AI (artificial intelligence) solutions is certainly an enticing option. Experts speaking at The Network Forum in Vienna (25-27 June 2018) are unsure as to whether this technology is actually a false economy or not.
In theory, removing human intermediation from repeat or monotonous operational processes should facilitate cost benefits and efficiencies. However, one panelist argued that many of the functionalities in the post-trade industry run on STP (straight-through processing) and were fairly automated already, raising questions as to whether RPA (robotic process automation) tools were warranted given the costs of integrating the technology.
The real impact will be felt when machine learning or deep learning is properly integrated with robotics. This, said a panelist, would enable intelligent robots to monitor transactional processes and flag problems or unusual activities for further investigation. AI tools could also enable custodians to monetize data by aggregating information which they hold and then sell it onto clients for a fee.
Let’s have a look into the future
A study commissioned by SIX in 2017 found that 63% of senior decision-makers believed AI and RPA would be used in at least one post-trade function by 2027.
Creating value through new technology
Asked which technologies they believed would be in mainstream use for at least one post-trade function by 2027, 63% of respondents cited RPA and AI, 57% DLT, 50% cryptocurrencies and 37% application programming interfaces (APIs).
A large number of those surveyed by SIX said AI will be deployed in areas of financial services such as regulatory compliance, client services, collateral management and margin call processing.
Common uses of AI in post-trade processing by 2027
Some 87% of respondents saw a genuine use for AI in post-trade processing. The most common mainstream use envisaged is for regulatory compliance (53%), particularly among asset management firms and those who see regulation as hampering innovation. Other uses cited by a significant number of participants include client service (50%), collateral management (48%) and margin call processing and dispute resolution (40%).
Nino Ciganovic, Head Global Relationship & Network Management, Member of the Management Committee, Securities & Exchanges, SIX, said AI was rapidly becoming enshrined in people’s daily activities, adding that the technology would become increasingly mainstream in the post-trade industry.
RPA – by removing human intermediation from repeat or monotonous operational processes – will bring a number of benefits to the post-trade industry, too. The SIX study found that 68% of respondents said RPA would deliver cost reductions, while 57% acknowledged it will help drive business efficiencies.
Areas that can benefit from RPA
RPA is seen as likely to create the most value through cost reduction (68%) and driving efficiency (57%). It is perhaps one of the most visible technologies in terms of early adoption, where it is already deployed to handle routine, rules-based functions such as account opening.
Nino Ciganovic highlighted how the gradual AI-enabled decline of labor-intensive roles in the post-trade industry could facilitate huge benefits for employees, as they will be assigned more sophisticated and interesting projects to complete, delivering greater value to clients. We will stay tuned – for the benefit of our clients!