The global custody industry must make significant changes if it is to survive in a digitalised world, heard attendees of the Global Custody Forum in London.
One panellist predicted a metaphorical ‘funeral of the banker’ due to the digitalisation of the industry. Referencing the decline of the entertainment and retail industries, the panellist asked: “Why shouldn’t custodian banking be digitalised as well?”
Custodians typically use technology to cut prices for their clients, rather than to reduce their own operational costs, meaning that, while balance sheets may show a rise in income, this does not necessarily lead to growth.
“Taking on more assets means taking on more people, and that means more costs,” explained the panellist.
“There may be an uptick in servicing fees, but the rise in income is an illusion.”
The panellist suggested that in order to stay relevant in a changing market, custodians should consider becoming data businesses.
Online companies are proven to hold a huge customer base, gathering large amounts of data that can be turned in to profit. But this raises its own questions around ownership and purchase of data, conflicted interests, and whether, in fact, banks can add any value to data.
Traditionally, these companies are not custodians of data, but of cash and other assets. According to the panellist, in order to make data custody companies work, and therefore secure a future for current custodians, they must commit to building trust relationships with clients.
“Stop thinking about the data, start thinking about the people whose activities make up the data. Think of them as people with whom you can build a relationship,” added the panellist.
Custody banking should be a “human activity” and banks should be prepared to pay for data as well as being paid to process it.
“Being trustworthy will abolish threat of regulatory fines and win back the trust of clients.”
“The successful global custody bank of the future is one that is trusted. Just as good money can drive out bad money, good banking can drive out bad banking.”
