Revenues have plateaued, and margin pressure is driving buy-side leaders to revisit their operating models. While the urgency for change arises both from within and without, exogenous factors, such as market volatility, fee pressure from new entrants and complicated regulatory requirements are largely beyond the control of individual firms.
Endogenous factors, conversely, may be leveraged to future-proof organizations. With the right approach, technology can be a silver bullet.
As asset owners and asset managers seek to shape business models that are responsive to new market realities, there is significant potential in adopting digital technologies within the investment services space to create value and unlock the latent potential of organizations.
Applied alongside process automation, AI could further enhance efficiency as machines learn from the activities they perform and improve over time.
Two-thirds of those surveyed in the BNY Mellon Investment Management ‘Future 2024’ report said that developments in AI would ‘definitely’ rewrite the future of asset management globally. Portfolio managers and quantitative specialists are increasingly using tools such as cognitive computing, machine learning and social media to obtain informational advantages, while robotic process automation is being applied in the asset servicing space to enhance client experience.
BNY Mellon is using AI – natural language processing, in particular – to identify the intent of client inquiry emails so they can be routed to the right teams for rapid resolution. We are also using machine learning to classify and understand incoming trade instructions to eliminate manual processing.
National University of Singapore
With the convergence of fintech companies and financial institutions in the investment space, we see increased acceptance and implementation of blockchain. The concepts behind blockchain or distributed ledger technology (DLT) have been around for few decades, but it was the creation of Bitcoin that brought all these technologies together and demonstrated the benefits to the wider investment market. Large financial institutions and regulators around the globe are now looking at blockchain as a means by which to eliminate unnecessary or duplicative processes, reduce costs and increase efficiency, transparency and resilience.
Head of Blockchain
With an exponential rise in demand for data, asset servicing providers are now developing application programming interfaces (APIs) to give institutional investors the ability to receive data the way they want it, with on-demand frequency. Coupled with analytics tools, such data empowers buy-side leaders to boost investment performance, increase asset flows and improve client experience with the aim of generating value for end-clients and across the organization. Asset servicing providers such as BNY Mellon are already solving real-life operational and investment problems using APIs today. Implementing our suite of custody APIs helped a large sovereign institution reduce latency in its cash positions by 50%, resulting in better cash management by the client’s front office.
In our experience, many of our clients use multiple legacy systems with limited integration, creating an inconsistent data source that creates challenges for data consolidation and demands endless reconciliation.
Having an open ecosystem provides institutional investors with the flexibility to choose best-in-class systems for their investment activities and capture insights from a wide variety of data sources and vendors. This open, ‘plug-and-play’ model thereby provides deeper intraday insights and more real-time transparency around trade activities and NAV construction, helping chief investment officers, chief data officers and chief risk officers to achieve a single source of trusted information and insight.
BNY Mellon’s open platform strategy offers our clients choice. We are exploring partnerships with everyone from small fintechs to large tech firms, as well as working with clients, providers and even competitors to develop flexible, insightful and effective solutions.
Head of Asset Servicing and Digital