Expect more standardization and outsourcing. For instance, contrast the standardized accounting in the mutual funds industry with, say, private equity administration. Not nearly as much is outsourced in private equity because there aren’t as many standards and rules governing it. The same goes for asset servicing. Do managers think trading is an essential part of their alpha strategy? They don’t. It’s now a standardized, rules-based function and ripe for digitization.
When an organization understands the complex challenges facing its clients, it can digitize just about everything. If COVID-19 reinforced anything, it is the critical need to digitize every process and interaction. It happened in custody years ago, and it happened in accounting. We see digitization transforming administration today. Going forward, we’ll see just about every part of what was once in the realm of bespoke client service become automated.
A defining characteristic of the revolution underway in capital markets is the digitization of everything. The algorithmic investing of beta and index products continues to be enormously popular. Even client sales and client service are benefiting from machines. We’re implementing Microsoft Dynamics 365 as an end-to-end platform on which we automate inquiry routing and response, and incorporate machine learning and eventually AI, to facilitate better decision-making. We use this information to improve existing solutions and develop new products to address client needs.
Distribution is perhaps the most noteworthy function to be transformed by digitization. BNY Mellon is reconfiguring our business in order to leverage our unique position across services and clients. For example, we’re taking state pensions, health savings accounts and other personal savings programs and integrating them with back-office administration and intermediary analytics. We are also taking advantage of machine learning to help asset managers better understand predictive market demand drivers and sales momentum for mutual funds and exchange-traded funds in the U.S. so they can gauge how to successfully gain market share.
Digitization also provides us a great opportunity to develop our talent by challenging them to take the organization forward.