Haytham Kaddoura explains that as SmartStream continues to expand its capabilities into further sectors, the focus is to keep pushing the boundaries with new technology
How would you describe the current environment within the asset servicing industry?
Technology is playing an increasingly interesting role in this area - especially with the rise of artificial intelligence (AI) and machine learning, and their entrance into daily processes within the financial services industry. Many of the banks’ deployment strategies are now looking at the cloud to deliver functionality to the broader operation as they strive to seek operational excellence.
We are finding that regulatory requirements are the driving force behind this change and are impacting the way the industry uses technology.
What impact has regulation had on technology?
The impact of regulation on financial services has been massive. The introduction of more complex and costly regulations is seeing a rapid development in new technologies and services that specifically address these challenges and make a difference to the automation of processes within financial services firms. The effectiveness of technology in relation to capital markets isn’t new to SmartStream, but it has taken a financial crisis and new regulations, for example, the European Market Infrastructure Regulation (EMIR), the first and second Markets in Financial Instruments Directive (MiFID II), and the Securities Financing Transactions Regulation (SFTR), for the industry to recognise the importance of the third-party vendor community and the technology stacks readily available to support their businesses in the adoption of new digital strategies.
SmartStream is well prepared to deal with incoming regulations, we have built a suite of mature solutions and services which have been developed with our market practitioners over 40-plus years, aimed at solving real problems in the industry. Functional enhancements and deployment options are continually being implemented as part of the ongoing investment we make in our product roadmap.
With all of these increasing regulations, how important is technology in allowing for a more effective and streamlined approach to regulation?
Regulators are demanding more from the financial services industry and without continued investment in technology, every regulated entity risks being unable to keep pace with change and becoming a failed organisation. Fines for non-compliance can be steep within this area, so it is essential that firms keep abreast of regulatory change.
When approaching regulation, technology is an important factor that needs to be considered.
The latest regulations allow a limited timeframe to provide compliance reports given the masses of data that the executions need to go through — and technology is crucial to this process.
Industry demands are so great that entering information into a spreadsheet manually will no longer suffice. Moving to a more expedient, automated solution is a necessity to stay relevant in this highly competitive world, enabling firms to streamline operations and become more resourceful.
Now more than ever, the banks need to respond to regulation and technology vulnerability. Inbound problems are putting increasing pressure on internal systems and there is a growing need for firms to adopt frictionless solutions, which are able to move at the same pace of change without causing massive disruption and cost.
SmartStream is working with its clients to make sure they realise the benefit of change without carrying the technological burden. Through adopting the latest technologies, and by freeing up resources, new revenue streams can be achieved from operational excellence.
What opportunities has AI so far unearthed in the industry? How will AI further transform the asset servicing industry?
Predictive analytics has propelled AI, it allows institutions to go beyond understanding historical data. It is producing useful insights that delve into what has happened and suggest what could be done to improve a certain scenario. In addition, it can help institutions detect trends and customer requirements as well as dynamically shape the way they interact with their clients, allowing them to identify what their clients need.
Towards the end of last year, we launched SmartStream Air, the first solution to be developed by our innovations team in Vienna. It is a truly cloud-native AI-based reconciliations platform designed to deliver results in seconds. Processes that would typically take days or even weeks can now be managed with fewer resources and with minimal intervention.
With machine learning algorithms, data is continually being improved which results in better outcomes. Over time, by using this approach, we can minimise the amount of data required to resolve the task in hand.
We will continue to expand the use of AI to allow customers to use even more data structures and it is being embedded into many of our modules.
What is SmartStream currently working on in the technology space and what is on the agenda for 2020?
As part of the ongoing development, we will expand the use of AI and machine learning capabilities to allow customers to use even more data structures.
Our innovations team is already realising the new possibilities that technology brings to the solving of real business problems. For example, we are using technology to understand natural language processing, which is an AI-based technology that deals with the interpretation by machines of spoken human language.
Over time we will be embedding AI and machine learning technology into all of our solution modules, and as we continue to expand our capabilities into further sectors, our focus is to keep pushing the boundaries with new technology.
How do you expect the asset servicing industry to develop over the next few years? What parts of the industry will excel and who will get left behind?
Middle- and back-office processing will undeniably become highly automated and super smart. Although it will be heavily reliant on AI and machine learning, I think it will require a degree of strategic intelligence, as well as human interaction and validation.
SmartStream is helping its clients solve future problems, rather than reacting to the here and now. The companies that will get left behind will be those who refuse to invest in future technology in order to respond to market vulnerability and regulatory change. Technology is a catalyst for change and it is going to further alter the way the industry does business.
There will always be a place for niche players and niche markets, but in order to compete, they will need to upgrade their technology to stay relevant today and in the future.
