Global Custodian Fall 2018 | Page 15

[ U P D AT E ] BNP Paribas Securities Services chief says custodian has more than 20 ‘significant’ tech projects BNP PARIBAS IS HALF-WAY THROUGH A FIVE-YEAR PROGRAMME FOCUSING ON IMPLEMENTING DIGITAL INITI- ATIVES ACROSS THE GROUP. C ustodians have been relentlessly bom- barded for several years now at industry conferences and in editorials with apocalyp- tic prophecies warning them that technolog- ical disruption was going to obliterate their industry. However, they now appear to be on more solid footing as businesses increasingly invest and beta test new products and solutions. Having seen taxis, high-street retailers and travel agents, among others, disinter- mediated by disruptors, banks have finally grabbed the initiative, in the opinion of Patrick Colle, general manager at BNP Pari- bas Securities Services. “Banks are very well-positioned to react to change, primarily because of their sheer scale,” said Colle. “While our size admit- tedly precludes us from being as nimble as FinTechs, custodians and asset servicers are investing heavily into technology change. At BNP Paribas, we are two years into a five-year programme to spend €3 billion across the group on digital initiatives cov- ering blockchain, AI, e-commerce, and the customer interaction space. “Having gone from a small number of tech initiatives, we now have more than 20 dif- ferent significant projects within securities services.” This scalability of banks also makes it incredibly difficult for small FinTechs to compete on an equal playing field, although Colle acknowledged that financial institu- tions and technology companies were be- coming increasingly interconnected through strategic partnerships. “I doubt there will be an ‘Uberisation’ of the custody industry by a small FinTech, although custodians are transitioning more and converging into technology companies. There has certainly been a growth in cus- todians and other providers buying equity stakes in FinTechs, such as Fortia in the depositary bank space,” he said. While there are some exceptional FinTech companies around, the market is at sat- uration point and a rebalancing of supply is inevitable. A number of FinTechs have undergone multiple fundraising rounds which has distracted them from product development, while others have exhausted all of their available capital and gone out of business. So volatile is the FinTech indus- try that some conservative suppliers and vendors are refusing to work with start-ups. Others point out certain FinTechs are guilty of over-extending themselves or developing products in markets where they are not necessarily needed. The biggest threat of disintermediation to banks, however, comes from the big technology groups, a number of whom are providing payment services and are looking for ways to generate revenues by leveraging open banking regulation in Europe. These companies’ sheer net worth means they are unencumbered when investing in new prod- ucts. Apple became the world’s first ever $1 trillion company by market capitalisation, while Amazon reached a similar milestone shortly after. Custodians have done well engaging with the small FinTechs, but now is the time to improve their relationships with the major players. Fall 2018 globalcustodian.com 15