Since the financial crisis, the landscape for custodians has changed rapidly. Globally, there is an intense focus on risk and cost reduction driven by increasing regulatory and client demands, and ever-evolving technological capabilities. Custodians of all sizes are reconsidering their business models and looking for ways to defend and grow their market share.
Since the financial crisis, the landscape for custodians has changed rapidly. Globally, there is an intense focus on risk and cost reduction driven by increasing regulatory and client demands, and ever-evolving technological capabilities. Custodians of all sizes are reconsidering their business models and looking for ways to defend and grow their market share.
Global custodians and universal banks are investing more time and energy than ever in their networks, enhancing the services received and increasing their reach—forcing local custodians to beef up their technology and systems, so as not to be a weak link.
Custodians are now caught between the demands of regulators for more data and reinforced processes, and their clients who ask them to reduce their fees while increasing their scope of services. Clients are looking for faster speed to market, more transparency in regulation within those markets, better understanding of how things settle, how corporate actions are processed, how accounts are opened, and how assets are actually held within the local market.
It is not enough to focus on a single market any more; custodians need to adopt a multi-market approach (either directly or indirectly) to survive. Not forgetting of course, the paramount focus on operational excellence.
So, in this competitive and cost-conscious world, how can custodians plan for growth?
At SWIFT, we have been working with custodians across financial services for more than 40 years. We are the de facto global network for cross-border financial flows—connecting more than 10,500 institutions in 215 countries and territories. Over this time, we have seen our contacts at custodians change from a very process-focused position to become far more business-focused on collecting and managing strategically critical information.
As the systems and services evolve, so do the possible options for businesses to consider. The term ‘big data’ has been coined recently to highlight this mounting challenge and the need to try and find meaning and value from the mass of information available. Multiple internal departments such as sales/product and network management but also compliance/risk/legal are all demanding meaningful business insights and access to an up-to-date central source of information about business activities.
To help provide clarity, over the years SWIFT has developed a number of business intelligence (BI) tools to query network traffic flows. The SWIFT Watch suite includes analytical and benchmarking services coupled with tailored consulting and training services. Using these services, SWIFT helps clients to strengthen their understanding of their business, the market they operate in and how they perform against competitors. Traditionally these tools have covered more correspondent banking traffic flow than securities but all of that is about to change.
Building on the existing business intelligence functionality from SWIFT, the new Watch for Securities offering extends our portfolio to provide new enriched fields specifically focused on securities messages, which will initially cover settlement and asset servicing.
It will be able to be used for a number of purposes including monitoring of an institution’s own traffic or benchmarking possibilities such as activity share analysis and operational efficiency analysis. Built on a secure online platform, Watch for Securities will help institutions compare their own activities with the overall activity flowing on the SWIFT network, segregated by client type.
Particularly, product managers at local custodians will be able to use Watch for Securities to gain insight on their securities flows and use this to adjust their systems and focus their activities.
Let’s try and bring this to life with a concrete example. Imagine you are a local custodian based in Singapore, and that you are competing on cost or service while trying to increase your broker-dealer client basis and revenues. With Watch for Securities, you will be able to track SWIFT securities flows in Singapore and benchmark yourself with specific types of players. With this unique perspective, and genuine insight that can only be provided by a neutral body such as SWIFT, you can then monitor the evolution of your market position on an ongoing basis as you roll out your strategic growth plan.
You will also be able use these tools to compare and contrast with other regions, and consider if there is sufficient room and opportunity to grow into those markets.
This information will be useful for the product teams of the local custodians but also for the network management departments of their clients.
Finally, from a technical perspective, Watch for Securities does not replace any existing monitoring system you have in place. Instead it provides an additional independent and monthly aggregated source of updated relevant global traffic information and avoids the need for your institution to gather that data itself from its own multiple internal systems and locations.
The data provided will help clients and agents to analyse operational processes such as: ratios of cancelled settlement instructions; distribution in time of instructions settlement occurred on expected settlement dates; and processing time of the corporate actions announcements per event types by comparing performances of your operations and agents against the market average.
We believe that by providing these views and dashboards on a regular basis, we can give managers a unique possibility to benchmark themselves and plan for the future.
What seems clear in today’s world is that extracting business insights on network traffic from raw ‘big data’ is a top strategic priority. SWIFT continues to innovate to support the financial community, using our technology and reach to provide cost-effective solutions to support our users in their efforts to identify new markets and opportunities for growth.
