The evolution of a core nancial service | Custodian & Depositary Banks
04
Many focus on adapting their legacy
systems to cater for requirements imposed
byregulators.Mostoften,thismeans
patchingplatforms,likelyimplemented
inthe80s,addingcustom-builtEnd-User
Computing,andchangetheorganization
and operations to keep the business going.
Today,depositariesandcustodiansface
asetoffurtherchallenges,withshrinking
margins due to high levels of manual
processing,increasedcompetition,and
generally uncertain macroeconomic
environments. Additional regulatory
changescanbeexpected,suchasKnow
YourCustomer(KYC)beingextended
todistributors(KYD),andAnti-Money
Laundering (AML) including digital assets
suchascryptocurrencies.However,it
isbelievedthat,atleastfornow,alarge
Mostoften,thismeanspatching
platforms,likelyimplemented
inthe80s,addingcustom-
builtEnd-UserComputing,
and changing the organization
and operations simply to keep
the lights on.
chunk of regulatory changes should already
be behind custodians and depositaries.
This leaves time and budget to focus
onopportunities,mainlycenteredon
technological innovation and new services
asdierentiators.
Onatechnologicalside,thekeytrends
and opportunities for custodians and
depositaries are the following:
•Increasedoperationaleciencythrough
the automation of processes that are
still partially manual and particularly
repetitive,byleveragingonRobotic
Process Automation (RPA) capabilities
•Revamped,faster,andcheaper
settlement processing using Distributed
Ledger Technologies (DLT)
•Adaptation to the digitization of assets
through tokenization and creation of new
asset types such as crypto currencies
•Consolidation,processing,and
monetization of the large volumes of data
that custodians and depositaries have at
theirdisposal,byactingasaggregators
ofdataandservices,throughthe
potential adoption of new and emerging
technologiessuchasAI,blockchain,and
cloud solutions
Moreover,custodiansanddepositaries
can harness their broad reach within the
markets and new client needs to take
advantage of the following:
•Operational readiness needs to be
ensuredforassetssuchasExchange-
Traded-Funds,whichcangeneratehigh
volumes of transactions