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rtificial intelligence (AI) is a
concept that elicits very mixed
reactions from people, and the
distrust is quite easy to fathom. Firstly,
it evokes understandable fears of mass
redundancies, a point reinforced in a sur-
vey by PricewaterhouseCoopers (PwC),
which suggested up to 30% of UK jobs,
or 10 million people, could be put out of
work by robots in the next 15 years.
Secondly, perceptions have been shaped
by the big screen, in which films have
generally painted AI in a negative light,
with the technology typically spiralling
out of control, and attempting to kill off
the protagonists or destroy the planet.
The reality is, however, a lot less sensa-
tionalist.
AI is a broad concept, and can include
machine or deep learning, whereby soft-
ware autonomously learns new infor-
mation, becoming progressively smarter
over time. Robotic Process Automation
(RPA), meanwhile, does exactly what it
says, namely it performs functions that
are repetitive and monotonous. Other AI
modes include computer vision, natural
language processing, and pattern or pre-
dictive analytics.
“The human factor and personal engagement
is a key asset in the services’ space. Clients
gain comfort from knowing their accountant
and their service provider.”
DAVID THORNTON, GLOBAL HEAD OF FUND SERVICES PRODUCT
MANAGEMENT, SECURITIES SERVICES, DEUTSCHE BANK
The software is being used by a handful
of banks in customer-facing roles but
also in middle- and back-office functions
like KYC (know-your-customer), AML
(anti-money laundering) and regulatory
compliance. AI’s role in automating high-
ly manual processes is unquestionable,
and it is prompting a number of fund ad-
ministrators to explore the technology’s
applicability in their own core business
offerings.
AI’s data processing powers are far
superior to that of humans. In fund ad-
ministration where huge volumes of data
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Global Custodian
Summer 2018
emanating from different counterparties needs to be aggregated
and consolidated on a repetitive basis for clients, AI could offer
huge opportunities. “AI lends itself pretty well to the fund ad-
ministration world because we deal with huge data sets. We feel
AI will play a huge role in regulatory reporting, for example,”
says Michael Megaw, managing director, SS&C GlobeOp.
Bank-owned administrators are also recognising AI’s oppor-
tunities. “The benefits of RPA and AI in activities such as fund
administration are simpler and faster processing, and access
to more focused exception reporting. These technologies also
provide greater ability to collect more detailed processing data
which is key to continual improvement capabilities,” says Rob
Ward, head of change & initiatives, RBC Investor & Treasury
Services (RBC I&TS).
Banks are now exploring how these technologies can be ap-
plied to various aspects of trade capture, validation and routing,
and are assessing its viability in areas including fund subscrip-
tion and redemption analytics, text analyses of financial reports
and optimisation of client inquiry emailing routing.
The AI effect
Through streamlining data aggregation exercises - processes
which once commanded enormous human intervention and
resources - fund administrators will realise huge cost savings.
These cost benefits will ultimately be passed down to fund
manager clients, who themselves are struggling with increased
operational and regulatory demands.
However, Ward highlights cost should not be the sole reason
for implementing an AI strategy. “The benefits of RPA and AI
include client visible quality improvements, timeliness, accuracy
and risk reductions and these should feature as you prioritise
deployment of the technology,” he says.
AI not only increases the speed at which administrators can
carry out their work, but will also improve the accuracy. One of
the biggest complaints at managers about their administrators
is that mistakes and errors occasionally creep into their calcu-
lations, forcing clients to often shadow a lot of their providers’
work. An AI enabled automation service would cut out a lot
of these mistakes laying the foundations for a superior client
experience.
“AI will certainly help administrators improve the accuracy of
the work they are doing,” explains Rahul Kanwar, executive vice
president at SS&C GlobeOp.
“There is a lot of client interest in AI and we are fielding in-
quiries about what we doing with AI and how we are approach-
ing it. Clients have generally reacted positively, but the technolo-
gy is still in its early days.”
While A I does hold a lot of positives for the fund adminis-
tration industry, there are obviously some risks, namely that
individuals whose roles involve repeat processes could be put
out of work by RPA and other AI systems. Nonetheless, there is
optimism that rather than introducing a swathe of mass sack-
ings, AI will create opportunities. “AI will free up resources of
existing staff enabling them to pursue more interesting opportu-