How have disruptive technologies affected the asset servicing industry over the last 12 months? What challenges have you heard from clients?
Although disruptive technologies have created a huge amount of uncertainty within the industry, with a technology lens, disruptive technologies like robotics are not intimidating at all. It’s scary for many people who think they’ll be replaced by the technology of this nature. But robotics, in particular, is a manageable technology as one has a high degree of control over where and when it is deployed. I think that it has been fairly well received by executives and technology specialists, but interestingly maybe less so than people actually affected by robotics on a day-to-day basis.
Certainly, blockchain hasn’t quite been demystified yet. It has incredible potential, and although we have pilots of these processes globally, it seems to be stuck in the starting blocks. In the transfer agency business, in particular, there have been many impressive pilots conducted around the world where, without any human intervention, transactions are successfully completed in seconds. Despite these successes though, blockchain is yet to gain a meaningful foothold.
Within the asset servicing space, artificial intelligence (AI) has probably got the least traction, because it’s such an unknown. From an asset servicing perspective, blockchain and robotics are probably favoured over other disruptive techs. The challenges lie with overlay and control functions and how we bring technology into the control space—and that’s where AI can help us.
Ultimately, technology cannot be the basis for sustainable competitive advantage. However, the failure to implement these technologies may result in a competitive disadvantage and, ultimately, disintermediation.
Why is it important that financial services firms embrace technology? Do you think some firms need more education around how technology can be a help to them?
Asset servicing firms need to embrace technology. Since the very first day I joined Maitland fifteen years ago, we have been under pressure from our clients to deliver higher levels of automation, straight-through processing and reduce the number of human touch points in processes to reduce the risk of error.
The more breaks you have in a process, the more opportunity there is for error, financial liability and reputational damage. Asset managers’ reputations can be easily damaged by errors which impact their investor base.
The timelines and pressures to deliver to our asset manager clients are being compressed all the time. We want to get closer to real-time net asset values (NAVs) and the concept of hours or days’ delay between the closing of markets and NAVs being available is becoming less tolerable for clients and end clients. We need technology here to help close this gap while maintaining high levels of accuracy.
In some ways, we need better education around technology. What’s interesting is the cost of technology has been coming down a lot and if you look at the boutique asset services out there, they probably didn’t have the funding to invest in cutting edge technologies in the past. But if you look at some of the robotics and what’s available now, the cost overheads are really tumbling down.
Why are digital offerings from fund administrators falling short of operational standards? How can this be improved?
The primary challenge is probably keeping pace with the skills that are required from technologists. Although quite expensive, these are bright, young people driving new revolutions in your business—bringing fresh ideas, not encumbered by legacy. In South Africa, these skills are in high demand at the asset managers, banks and of course the asset service providers.
At Maitland, we’re starting an internship programme whereby we are bringing in bright, young graduates to develop their robotics capabilities because we want to increase the skills pool available to the marketplace. We hope they are excited about what we’re doing and the change they can make in the industry and in our business.
Do you think collaboration with fintechs is the way forward? How can they help?
It’s the only way forward. It’s imperative to partner with fintechs. Although Maitland is more of a financial services firm, partnering with fintechs enables us to gain access to cutting edge tools and thinking. We want people that are really excited about the technology.
There are a lot of vendors out there selling these solutions, but they don’t teach you how to embed it in your business. This is a gap in the current offerings.
We’re early in the robotics journey, but the feedback from our clients is very positive: they love that we are delving into new technologies—we’re starting to have those conversations with clients where we are looking to partner capabilities and leveraging collective knowledge, deploying robot solutions.
We don’t want to shoe-horn in technology purely for the biggest financial gains, you want something that’s sustainable and intelligent, as well as value-adding.
What role do you expect disruptive technologies to play over the next 12 months?
Robotics will gain a massive amount of traction and take off. The top robotics companies in the world are growing at a phenomenal rate.
I do hope the nut around blockchain will crack so it does get some broader adoption, which will create boundless efficiency. The challenge of blockchain is a community one, it really needs to be a utility service, rather than a particular provider.
The asset servicing and custody side will be shaken up by blockchain massively. If people aren’t adopting, looking to adopt, partner with someone, or leverage a fintech utility, they could be in a lot of trouble.
We’ll continue to see AI being used in the front office. By 2020, AI will start creeping more towards the middle and back office. But the primary challenge to all these aspects will be finding the people with the right skills.
What are the expected technology/back-office trends for 2019 from Maitland’s point of view?
Robotics will remain our primary focus. The second major driver is moving to the cloud. We’re looking at shifting to the cloud as much as we possibly can. Many of the traditional firms out there are under-estimating the processing power and scale of the cloud.
The choices of robotics and movement toward the cloud in asset administration are probably behind other industries, but unfortunately, the asset servicing industry is traditional and quite conservative. I see many other administrations moving in this same direction too.
