Becoming a data leader in securities services
The use of data analytics has been applied successfully across a number of different sectors - in particular big tech and retail - to identify changing behavioural trends and to deliver hyper-personalised services. Global custodian banks are now actively utilising data to enhance their offerings for clients. Duncan Cooper, head of data products strategy, Securities Services, HSBC and Ashok Lopez, senior vice president, sales, business development at HSBC, participated in an Expo session at The Network Forum (TNF), where they discussed some of the advances being made in the field of data analytics.
Learning from the leaders
Technology giants such as Amazon and Deliveroo have mastered the nuances of data analytics thereby helping them to deliver a seamless and enjoyable client service according to Duncan Cooper. “If you order a meal via Deliveroo, for example, the user can see the status of the order throughout its life-cycle from the restaurant’s confirmation right up to the delivery ETA,” he commented. At the same time, this exact data also enables big technology companies to build up comprehensive and detailed profiles of their own underlying customers – such as their purchasing preferences. “By extrapolating patterns from users, it enables technology companies to tailor their offerings according to customers’ requirements,” said Cooper. Banks are now looking to these tech firms for inspiration.
In securities services, providers are increasingly trying to deliver real-time information to their institutional clients’ smart devices through APIs (application programming interfaces). By using RPA (robotic process automation) and AI (artificial intelligence) technology, custodians can interrogate vast data pools and structure the information accordingly into vital business intelligence. This may include thorough analytics on geographical trends, operational risks (i.e. persistent settlement fail patterns) and potential compliance breaches (e.g. indications of financial crime). By having this information at their disposal, clients will be able to make quicker and better business decisions.
Delivering for the client
Although more clients are integrating digitisation into their operations, the securities services industry does need to be sensitive to the fact that some organisations may be slower to embrace change. Lopez highlighted that while certain institutions are increasingly consuming data via APIs, other clients still prefer to receive information through email channels or in a tabular report format. “The industry talks extensively about delivering real-time information and standardising APIs, which is obviously positive, but we need to remember that around 80 per cent to 90 per cent of data transfers take place in a flat file format via an SFTP (SSH file transfer protocol). The world is admittedly getting more interconnected, but different people are moving at different speeds. It is critical that we do not leave businesses behind,” added Lopez.
Overcoming the limits of data
Data extraction and analysis does have its limitations though. Irrespective of the capabilities of the AI or RPA systems being deployed to aggregate and collate the information, if the underlying data is of poor quality, then the end results will be of diminutive value. Cooper conceded that data accuracy was a challenge for custodian banks, but pointed out it could be improved by conducting back-testing and deep analysis of historic data sets, the results of which can then be fed into the gold copy system. “In order to improve data quality, organisations need to consume more information and conduct increased predictive analysis on that data to see if it is accurate,” highlighted Cooper.
As multiple institutions operate off divergent systems, there is a risk that some firms may struggle to process the data when they receive it. Cooper said it was critical that data standards or a taxonomy be put in place to ensure that interoperability can be facilitated. “English is a base language, but it does not always capture the nuances of Spanish or the intricacies of Japanese. The same is true of data. However, we need to embrace the differences. Google Translate is continuously improving itself as it identifies the language which it is translating from and the language it is translating into. This method can be applied to financial data, which is far more straightforward than the human language. As long as we understand the taxonomy from which the data is coming from and the taxonomy of where the data is going, the process becomes an automatic mapping exercise,” he said.
Delivering a superior service
Through the delivery of comprehensive and insightful data analytics to clients, the securities services industry will be able to help institutions make better informed investment and operational decisions.
Not only can excellent data analytics augment overall returns, but it helps clients identify and root out operational inefficiencies thereby facilitating cost savings. In the context of the widespread volatility in financial markets today, the ability to provide robust and informative data to institutional clients should be a vital differentiator for custodians.