Part 4 – Regulatory and Operational Client Lifecycle Management Ecosystem

Winners and Losers – The Outlook:

In our previous post we looked at the strategic choices firms can make in the client data management space. And as you are aware, there are a number of software offerings in this space, many of them either overlapping or complimentary. It is only natural to ask then, that with the abundance of solutions, over time will there be some winners and some losers? In other words, can the market sustain the number and variety of offerings currently available? In our opinion, both the banks and the regulators will, in the months and years ahead, dictate which of these services are used; as current procedure will highlight comparative data quality issues, ease of adoption and use, price for service vs operational cost savings and robust regulatory compliance.

Global coverage is currently a subject under assessment. Some utilities service a few key countries (US, UK, Australia, Canada, Hong Kong, Singapore and Germany) while others remain largely US-centric. Differences in this coverage will be short lived though, as adoption and participation gains momentum in the year ahead.

Whatever the case, hypothetically, if any one of the utilities wins more bank business than the others, does that mean that the others will become redundant? Some pundits are of the view that, due to global demand, it is more likely that a level of interoperability would occur, where fund managers input their data and documents into one utility and make that information available via others.
In addition to this interoperability between utilities, there will be a need to examine and understand utility integration with other types of software and service providers, who support onboarding, workflow management, data aggregation, compliance capability, sanctions screening and general risk management.

Connectivity Future State:

When looking at integration requirements, even firms whose technology teams are able to develop, test and deploy Application Programme Interfaces (API’s) to the existing sources, there is still the ongoing overhead of maintaining these API’s over time, which needs to be seriously considered. One of the regulatory problems faced by firms today, is how forward looking they need to be in terms of data acquisition and processing. The interfaces to the sources will change with new content requirements, not to mention the coming of entirely new sources or service provision applications themselves. From any firm’s perspective, creating and maintaining a technology team specifically to manage this situation is an undesirable burden, especially in times of ongoing funding cuts and capability downsizing demands.

Conclusion:

The industry at large, across both vertical and horizontal sectors (i.e. Banking, Sell and Buy side, the Corporations and the vendors of every hue and colour), is gradually rethinking the way we all have to manage regulatory change for strategic, sustainable capability in the future. We need to adopt and embrace a technology-enabled, collaborative model. This is the so called “platformification” of banking; where banks and Fintech / Regtech start-ups shift to become holistic banking and content platforms. Key services, as discussed above, will be integrated to provide superior solutions in speed, performance, convenience, cost and compliance. Forward thinking firms will take the opportunity to gain both business value and insights from the data they collect and create, under the reporting regimes. Through regulatory obligation they will be crafting opportunities to operate more efficiently and gain valuable market insight. The more inter-linked and symbiotic constituent parts of the ecosystem become, the better it will be for end users and vendors alike, and the more secure, safe and transparent our markets will be.