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vices firms, as opposed to going directly
to the customer.
The path towards mutualisation is also
encouraging banks to invest in incremen-
tal technology and start-ups that can give
them the edge.
Particularly in the area of DLT and
blockchain, custodians are more open to
partnering not only with FinTechs but
also their competitors through con-
sortiums and working groups to help
revamp the infrastructure in which
they operate.
Many central securities deposito-
ries (CSDs), custodians and Fin-
Techs are doing this through various
groups to see how blockchain can
revolutionise the way proxy voting and
corporate actions processes take place.
Northern Trust, JP Morgan, Santand-
er, HSBC, SIX and DTCC, to name a
few, have all ventured into blockchain
partnerships with FinTechs and other
custodians.
“FinTech will not compete”
Furthermore, blockchain technology has
the potential to create an entirely new
custody, clearing and settlement model
through smart contracts. Therefore, to get
ahead of this custody banks are becoming
more involved with FinTech and work-
ing faster to ensure their business model
continues.
“FinTech will not compete with the
custodian industry, however they are
closely aligning. There are some that are
disrupting, but you do not want capital
markets to be disrupted too much,” says
Walter Verbeke, global head of strategic
planning, Euroclear.
“Custodians need the solutions more
rapidly and therefore are coming to this
point where they have to decide. Whereas
such decisions previously would have
taken several years, financial market
infrastructures (FMIs) and custodians are
now having to make them within a few
months.”
However, there is a concern that
rebuilding everything with new technol-
ogies brought to the table by FinTechs
could be problematic.
“We think in the cash securities world
that FinTech has the possibility to help
replumb the entire infrastructure. How-
ever, because so much has been built up
on established systems, too much disrup-
“There is a
huge amount of
opportunity for us
to work with these
new entrants and look
at the technology they
bring, rather than them
being a direct threat.”
JUSTIN CHAPMAN, GLOBAL HEAD OF
MARKET ADVOCACY AND INNOVATION
RESEARCH, NORTHERN TRUST
Summer 2018
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