Pandemic Accelerates Digital Transformation
The Covid-19 pandemic and the need for staff to work remotely has accelerated digital transformation in financial services and highlighted the need for increased cyber security.
A panel discussed Covid-19: Building operational resilience- How adaptable and shock-resistant are we? at TSAM Digital conference yesterday.
Duncan Cleat, enterprise account executive at technology provider Clearwater Analytics, said on the panel that firms using cloud-based suppliers have fared well during the pandemic while those using centralised legacy infrastructure faced more challenges.
Cleat asked: “What if the problem had been a cyber attack rather than a virus affecting humans ? How would the industry operate in a digital disruption ?”
He continued that firms need to learn from the current experience and continue to adapt their contingency plans. “They may want more frequent data back-ups so that if there is an issue, they only need to recreate one day,” he added.
Marco Di Palma, vendor management at JP Morgan Asset Management, said on the panel they had increased oversight of external service providers, such as custodians, since 2012/13.
“The pandemic is a good advert for accelerating digital transformation,” he added.
He continued that it will be interesting to hear the response from the regulators to the pandemic, as the industry has managed well so far.
Mary-Patricia Hall, head of regulatory reporting & oversight at Insight Investment, said on the panel that over the last three to four years, more staff – about 20% – have begun to work from home. However, that is now likely to be flipped with just 20% of staff in working in the office.
“Why wouldn’t you want staff to work at home ? It will be cheaper for companies,” she added. “Staff have shown they can work just as effectively and can have dinner with their family instead of commuting.”
SETL, the institutional blockchain payment and settlement infrastructure provider, hosted a Post Trade Post Covid panel last week
Michael Collier, European product securities services & ASL at Deutsche Bank, said on the panel that the industry had shown its resilience in the current environment.
Collier said: “We need to continue progression towards automation and a paperless environment and not go backwards.”
Peter Randall, founder of SETL, added that the crisis will force the industry to look at technology in a different way.
“Post-trade needs to be brought to up to the same standards as trading so it is fit for the 21st century,” said Randall.
Richard Barber, head of direct custody and clearing Europe at Citi, agreed on the panel that the crisis had accelerated change away from workflows that still need wires and paper.
Barber added: “How will we gauge productivity in post-trade in the new normal ? Will it be based on the settlement rate, accuracy, breaks, customer satisfaction?”
He continued that the industry has been leading the push towards digital processes. For example, proxy voting required physical attendance in some countries and custodians lobbied for a change in legislation.
“Investors are still issued cheques for dividend proceeds,” Barber said. “There is already a functionality within Crest, the UK central securities depository, to make these payments electronically which has been not taken up and that is not right in the 21st century.”
Great discussion. Incredibly insightful commentary on the unusual situation we find ourselves in. Look out for the recorded session if you missed it. #Covid_19 #SETL https://t.co/njuCaJlIem https://t.co/C6IOQlir66
— Anthony Culligan (@AnthonyCulligan) May 24, 2020
Stuart Warner, head of banks and broker dealer products, Europe, MENAT and Americas at HSBC agreed that digital proxy voting and virtual meetings are a significant step change.
Warner said: “Will there be more engagement as shareholders are more likely to attend virtual meetings ? Will more votes be cast ?”
Collier continued that the industry has been working towards removing proxy cards for voting through the formation of Proximity, the digital investor communications platform developed within Citi’s Institutional Clients Group.
This month Proxymity announced it has raised $20.5m in funding and will be spun out via a global, industry-led consortium.
🙌 Excited to invest in @ProxymityIC, an IR platform for proxy-voting processes, and join a consortium of industry leaders @BNYMellon, @Citi, @Computershare, @DeutscheBank, @HSBC, @JPMorgan, @StateStreet. https://t.co/N5sCsP0XdW pic.twitter.com/M32o1uNHyC
— Clearstream (@Clearstream) May 5, 2020
Warner said: “We need to continue to move away from paper and reduce operational risk. Account opening should be able to use electronic documents and corporate actions could become more efficient.”
Collier added that the crisis was a good opportunity to ask regulators to remove the need for wet signatures, particularly the tax authorities.
“The industry can sit down with regulators to put standardised procedures in place,” he said. “The temporary changes made towards virtual need to stay and there are opportunities to learn lessons.”
Covid-19 has underscored financial firms' need to reduce manual processing and create flexible infrastructure.
Firms need to ensure access to public cloud services when needed most, IPC's Jordan Feigenbaum writes.
Specific concerns pertain to equity valuations and unintended risks of fiscal stimulus, DTCC survey shows.
There's more focus on deploying an efficient technology stack across the investment management operation.
Retail inflows into responsible funds were four times higher in the first half of 2020 than a year ago.