From video conferencing to tokenised assets, technology is changing how we do business. Starting small and thinking big will be key to success.
The rise of social media means that we are constantly bombarded with content. Sometimes it is serious, but often it is frivolous. Scrolling through our personal feeds, we might see a funny cat video, cute babies or any number of the countless memes published every day. But does it ever occur to you to buy one of these images as an investment?
It is a question that only a few years ago would not have made sense. Today however, tokenised artwork, known as non-fungible tokens (NFTs), is a hot topic, with the most valuable selling for millions of US dollars. This technology allows online content to become unique digital assets, where the creator receives a percentage of the profits every time the artwork is sold. It can be applied to other things as well – from collectable pairs of trainers to individual songs.
The evolution of the NFT market might seem a distant issue for people working in Securities Services. But in fact, the underlying technology is directly applicable to the traditional assets that we handle on a day-to-day basis, because we can tokenise equities, bonds and even commodities.
“And as our industry starts tokenising assets, it will be as if we migrated from an old mobile phone to a smartphone,” said Hashir Rahim, Client Digital Experience Manager, Markets and Securities Services at HSBC. “The asset will know who owns it, what are the relevant rights and obligations, and what events will trigger payments and other actions.”
Mr. Rahim was speaking at HSBC’s Securities Services Future Leaders Live, a recent virtual event for the industry’s up and coming professionals, preparing them for the trends that will affect their development in the years to come. Tokenisation could radically change the future of custodian banking, he said, as it has the potential to shorten the settlement time to mere minutes, reduce the number of failed trades and automate processes like the payment of dividends to shareholders.
Change is a necessity
NFTs and the broader evolution of tokenisation are just some of the disruptive technologies that are changing long-established practices. Technological progress was already on an upward trajectory, but the pandemic has accelerated the pace of digital transformation in every part of our lives.
“Since the COVID crisis began, the digitalisation of the workplace has become important for many companies,” said Julia Kang, Graduate Analyst, Markets and Securities Services at HSBC. “Who would have thought that we would suddenly have to start social distancing? It was a wake-up call for everyone.”
She cited data showing how necessity sped up the adoption of remote working, with companies before the pandemic expecting that the transition would take 454 days to complete to just 10.5 days1. Video conferencing became a day-to-day tool for remote workers across the world. Only 10 million people used Zoom at the end of 2019. But that number shot up to 300 million by April of the following year2.
“This shows how quickly our workplaces can adapt and change,” said Ms. Kang. “So if our workplace is capable of changing so quickly, what transformations are available out there and how can we apply them?”
Starting small, thinking big
HSBC’s Securities Services’ growing digital offering is supported by more than just technological capabilities, but also by a way of thinking that realises a broader goal – namely, to make the lives of clients easier while enhancing employee efficiency and experience.
As an industry focused on transaction management and data processing, there are four broad areas to the Securities Services service model, each undergoing their own digital development, said Janice Ku, Director, Digital and Data, Markets and Securities Services at HSBC. These are Intelligent Transaction Manager (ITM) for transaction capture; APIs for real-time data access and standards; Securities Services Evolve for data visualisation and analytics; and Symphony River bot for query and exception management.
Ms. Ku gave an example of an internal initiative undertaken by HSBC’s Securities Services to improve how a trade’s status is tracked. Our goal was to limit the need for human intervention in a trade flow to only resolve potential exceptions, and we did this by applying artificial intelligence and machine learning principles that are now quite common in smartphone apps that drive services like food delivery. We used historical trade data to train a model that can predict the next update by reviewing transaction types, status changes, as well as the markets and counterparties.
The model has reached the proof-of-concept phase for internal processing and the model’s predictions are accurate 92 per cent of the time. Securities Services is working to make it even more accurate and is extending it as a service available to clients.
“It is a case study of HSBC starting small and thinking big”, said Ms. Ku. Innovative and flexible thinking will be essential in the coming years, and projects will be best completed with a collaborative spirit, as the success of a roll out requires working with clients, market infrastructure providers, and other stakeholders.
The project is also a sign that both the future of markets and the workplace are going to be increasingly tech-first. While this brings to our work life the kind of ubiquity and convenience we enjoy in our personal lives, our way of working, as well as the demands of customers, are going to become more technologically driven. It might be a daunting prospect for a young professional, but if the pandemic has proved anything, it is that real change is possible and collaboration is more important than ever.