[ U P D AT E ]
Custodians
called on to
rethink big data
strategies
CUSTODIANS COULD DELIVER
SUPERIOR VALUE FOCUSING
ON IDENTIFYING OPERA-
TIONAL PAIN-POINTS FOR
CUSTOMERS AND CREATING
SOLUTIONS OFF THE BACK OF
THAT EXERCISE.
S
ome of the big data strategies current-
ly being lauded at custodians require
a structural rethink amid concerns that
certain firms are developing products which
clients do not need nor want.
Instead of attempting to directly mone-
tise data by selling market or investment
analytics to clients, custodians would deliver
superior value if they focused more on iden-
tifying operational pain-points for custom-
ers and created solutions off the back of it.
“Custodians should be using the data and
applying it to solve tangible problems, which
I believe could bring about a number of
commercial opportunities. I think people in
our industry have been talking too literally
about monetising data, when instead the
positioning should be about creating value,
solving client problems and unlocking new
opportunities for customers,” said Chris-
topher Daniels, data product manager at
Deutsche Bank.
Daniels added Deutsche Bank had
developed a number of data driven tools
including one which measures and analyses
customers’ intra-daily liquidity usage. He
said the bank was now actively advising its
clients on how best to ensure liquidity opti-
misation, a strategy which could potentially
result in users lowering their funding costs
and generating better returns on cash.
A number of providers are also applying
data analytics to the settlement process, by
going through trade fails and picking apart
the transactions that did not complete.
“Custodians are using data science to
identify correlations in trade fails, which
is having a huge impact on settlement
efficiency. The Central Securities Depository
Regulation will penalise counterparties to
failed trades, so this technology will bring
huge benefits,” he said.
While analytics offers a lot of potential,
custodians must ensure the raw data they
use is accurate, otherwise they risk sharing
misinformation with clients. In order to en-
sure information is of good quality, custodi-
ans should conduct painstaking due diligence
on their sources so as to substantiate the
authenticity and reliability of the data.
Custodians also need to check information
is being sourced appropriately and has not
been obtained illicitly.
A failure to do this properly could put pro-
viders in hot water. Data has been an area
of focus for regulators, particularly since
the Facebook/Cambridge Analytica scandal
earlier this year.
The UK’s Financial Conduct Authority has
been especially blunt on the matter warning
banks implicitly not to misuse customer
information. Meanwhile, the EU’s General
Data Protection Regulation carries with it
serious fines for companies found guilty of
mishandling client data.
Winter 2018
globalcustodian.com
19