The global pandemic has brought to light the need for automation to cope with the demands of the new world. Firms have been hitting the reset button replacing manual processes with digital alternatives to enable the delivery of uninterrupted critical services from anywhere.
In the concluding part of an exclusive one-on-one with Chan Boon-Hiong, Director, Global Head of Securities Market Development & Advocacy, Securities Services, Corporate Bank (CB), Deutsche Bank AG Singapore, and Nigel Gnoh, Associate Director, Business Development – South East Asia, DTCC, the discussion focused on the effect of the pandemic on automation and digitalization.
Gnoh: From the industry standpoint, is there a need for capital market firms to reimagine or enhance their existing operations model to kick-start business growth, post-COVID19? Is now the right time to identify gaps in processes and leverage automation to fill the gaps or should firms adopt a wait-and-see approach?
Chan: Prior to COVID-19 capital market firms in the industry were at different stages on the journey towards greater digitalization and innovation to drive growth and achieve operational efficiency. In today’s challenging regulatory compliance environment, leveraging automation to meet the onslaught of compliance demands is a necessity. Increasingly, firms are seeing the benefits that can be gained from distributed ledger technology (DLT), artificial intelligence, application programming interface and the cloud. Despite an uncertain future, the momentum to innovate and reinvent will not be lost. What can change is prioritization as the industry slips into a more resource-constrained environment.
To manage investments and costs, firms will need to strategically determine where focus is needed and prioritize projects that fit new business needs in the next normal. Firms should also look at collaborating with external parties to optimize investments spend on streamlining and automating business processes. This is where financial market infrastructures (FMIs) are here play a leading role in providing services for the needs of the community which can reduce duplicated costly efforts at the firm level. The need to rely on FMIs is even more critical during a crisis where firms need to grapple with faster turnaround times and cost pressures. As an example, Hong Kong Exchanges and Clearing’s proposed HKEX Synapse is a blockchain-based platform that is integrated with DTCC’s Institutional Trade Processing suite of services to enable global investors to automate and expedite the trade confirmation and settlement process. As HKEX Synapse could foster higher level of standardized data definitions and streamline post-trade processes for Northbound Stock Connect trading, it can remove needs for individual firms to develop certain bespoke solutions to save costs and reduce operational risks.
Gnoh: From Deutsche Bank’s perspective, how do you prioritize innovative projects during this challenging period? Is client-centricity part of the process?
Chan: The criteria that we use to prioritize innovative projects are driven primarily by clients’ needs and market development. In today’s context, helping clients to manage post-trade risk remains a top priority for us (in Securities Services) and this concern is reflected in our product focus. For example, we seek to deliver accurate and relevant information in real-time to multi-parties to facilitate trade settlement and manage post-trade risks within the shortest possible timeframe. The 10-15 minutes in time saving is especially critical during market volatility where the operations teams would have to cope with unexpected spikes in trade volumes and increased time pressure.
In the longer term, we are looking at incorporating DLT as part of our solution. In the meanwhile, we have also internally experimented with DLT to identify potential implications on workflows, new value creation and regulations.
While technology is changing at breakneck speed, at Deutsche Bank, we are primarily anchored to how best change can benefit our clients and markets.
Gnoh: In my conversations with our clients in Singapore, Malaysia, Thailand and Indonesia, a common refrain is, “we are an investment firm, technology is not our strong suit”. Given your experience and exposure in the industry, what is your advice for firms that will be commencing on an innovation path?
Chan: Fortunately for the financial services industry, most if not all firms are at some – initial, early, middle or late – stage of the innovation undertaking. A prescription for optimizing investment dollar during and after COVID-19 is to look to key industry players such as FMIs to collaborate to realize efficiency gains and economies of scale unachievable by an individual firm. Valued for their central role in the post-trade community and regular industry collaborative efforts like T+2 migrations, FMIs offer opportunities for reducing cost, sharing expertise and insights, and integrating siloed systems and solutions within the financial services ecosystem with new technological capabilities. Together with the industry and the community, working with FMIs and regulators would be instrumental in advancing a smooth path to cost-effective automation and innovation.