The Digital Future of US Custody

How is digitalisation changing the custody business? TABB Group considers what clients want, as well as the concerns and needs of banks and broker-dealers.

The custodian space has evolved over the past 30-years. Operations were once manual, with back-office functions designed to input volumes of data. With the help of information technology, the industry was able to remove manual components of the business, which became necessary for mitigating risk and reducing errors. Automation then revolutionised how large volumes of data were handled, eliminating the need for employees to work in repetitive low-level tasks and allowing for a reallocation of resources to focus on client services. The internet revolution provided a more seamless mode of transferring information between custodians and their clients, and the capacity of the custodian to provide added real-time services. Now, digitalisation has become the major catalyst for the continuous change in the way the business interacts with clients.

On the cusp of this digital transformation for custodian banks and their clients, BNP Paribas Securities Services has commissioned the research team of TABB Group, a capital markets consulting firm, to acquire a deeper understanding of the expectations of sell-side executives at mid-sized US banks and broker-dealers on the future of custody: how they believe the digital revolution will change the business as well as focusing on their concerns, expectations and needs.


Bruno Campenon, Head of Financial Intermediaries and Corporates, discusses digital transformation in custody banking

Driven by the need to achieve value, reduce costs, comply with regulation and aggregate data, clients responded that they are looking for easy-to-use technology from their existing custodian providers, specifically client-driven user interfaces, and data aggregation services.

Digitalisation has become the major catalyst for the continuous change in the way the business interacts with clients

Industry foresight and helping them get ahead of the curve were particularly important for custodian clients, notably helping them better navigate regulatory compliance and critically keeping abreast of technology risks and cybersecurity.

Specific technology requests for their custodians included cloud computing and storage to migrate their own applications, digital identifiers to mitigate security risks, and distributed ledger technology.