Global Custodian Securities@Sibos 2019 - Page 19

[ D ATA ] Custodians are sitting on a mountain of valuable data which could be a new revenue stream if used properly, but as recent scandals have shown, navigating the data collection world can be a minefield. T he last few years have seen an aston- ishing assortment of sensationalist newspaper headlines likening big data to ‘the new oil’, ‘the new gold’ and alarmingly ‘the new God.’ Many custodian banks have watched technology companies like Amazon, Google and Netflix monetise their users’ data to brilliant effect, and they want to imitate that success. Identifying new revenue sources is not a nice-to-have but a must-have for securities services whose core custody and fund administration products are facing huge margin pressures. McKinsey data shows that securities services revenues grew by only 3% per year between 2010 and 2016, as low interest rates, a relentless ambush of regulation and fee compression took their collective toll. In contrast, at Amazon (founded by a former custodian) the lowest recorded annual growth in revenue between 2012 and 2016 was an eye-watering 19.5%. It is improbable a big data strategy of the sort imag- ined by the custodians will yield Amazon-esque returns, but it could open the door to revenue diversification, or so the thinking goes. The big data strategy at most custodians can loosely be deduced as follows. Gather lots of unstructured information about customers and markets which is parked – usually unsystemat- ically – across their businesses and use artifi- cial intelligence (AI) technology, like robotic process automation (RPA), to organise the data, identifying any trends or linkages. These insights in theory could help banks not only develop customised products on a timely basis, but even sell proprietary and bespoke informa- tion and research to clients. January 2019 Securities@Sibos 19