The time for custodians to innovate is now, said Jürg Unger, head of custody at Swiss Re, speaking at the Global Custody Forum in London.
Unger pointed out how little has changed in the settlement process, from a custodians’ point of view, saying it is “such a boring process—it’s labour intensive and more or less the same” as it has been for the last 20 years.
However, recent regulatory pressure has forced banks to change their operating models, and they are realising that their outdated computer systems are not prepared to cope with cyber crime.
He also suggested that custody clients are more aware about their asset safety, and have more knowledge of the custody chain than they have had, historically.
There is now an increased focus on technology in finding data solutions, and custodians are looking towards utility solutions for the likes of know-your-client and anti-money laundering requirements, Unger, however called corporate actions “the last bastion of manual work in the securities services industry”.
He also highlighted disruptive technologies such as blockchain, saying that this gives banks the opportunity to overhaul their IT systems, and the opportunity for a potentially safer ledger data storage system.
He added, however, that institutions are approaching blockchain with caution, wary of changing the “status quo”, to which he stated that custody profits have dipped significantly, and asked: “Has custody's status quo been so great?”
Finally, Unger argued that digitisation, harmonisation and modernisation are inevitable, and that new technology is the only way to secure a prosperous future.
He concluded: “We are at the verge of a fundamental and ground-breaking industry change."
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