How digital depositary services can create new value

Depositary banks are seizing upon automation and rich data to bring investment funds a new generation of high-value services.

As the ability to capture, share and analyse data in real time becomes a core capability for banks, investors and asset managers, leading depositary banks are digitalising processes and harnessing automation to create faster, more efficient and more interactive services for clients.

Building on its core depositary services of fund oversight, asset validation and cash monitoring, BNP Paribas Securities Services is exploring how technologies such as artificial intelligence (AI), machine learning and blockchain can help speed up fund life-cycle processes and offer access to wider and deeper data insights – as well as more user-friendly communication for clients.

This new generation of technology tools and services we are developing will help clients maximise the opportunities of more complex and faster-moving financial markets. They embrace digital assets as well as investments such as ESG-linked funds or securities, which all rely on underlying data for value. Crucially, they are being designed not just to meet client needs now, but anticipate what may be useful in future.

Technology driving transformation

We believe that technology can better deliver the data that clients need, when and how they need it, through a proactive depositary banking partnership.

AI-driven scrutiny of prospectuses and automation of confirmation and compliance supported by machine learning will enable us to validate fund positions faster for all assets. This will shrink the time lag between reporting net assets and depositary oversight confirmations, and speed the process of discovering and correcting any breaches. 

Automation, AI and multi-market digital data flows can also deliver a rich picture of fast-moving assets and markets, turning raw and unstructured data into actionable insights. Real-time data means real-time controls: the depositary control cycle is shrinking and the rate at which asset values can be corroborated, and portfolio compliance established, is already critical. In the case of inherently volatile markets, real-time data and insights are becoming essential to establish value as well as mitigate risk. 

Better risk management

A changing investment universe brings new challenges. Digitalised and data-driven depositary banking services can play a key role in tracking and mitigating risks associated with digital assets and ESG-linked assets. Digital assets, for example, may be distributed across multiple platforms and stored in a variety of ways, while asset liquidity may fluctuate on an hourly basis. Protecting assets from cyber fraud and anticipating regulatory interventions are constant concerns. To address these risks BNP Paribas Securities Services is testing a blockchain proof of concept that enables digital assets to be traded, transferred and maintained as safely and effectively as traditional financial assets. Engaging with national regulators and industry representative bodies allows us to anticipate regulatory change and adapt our service offer accordingly.

Funds are also increasingly investing to fulfil their ESG mandates. We are about to go live with a sophisticated ESG data architecture that enables our clients to demonstrate that their portfolios are ESG compliant and are enhancing the datasets we run across these. As the market for ESG-linked assets matures and regulators in several jurisdictions move towards a universal, data-supported classification of ESG impacts, depositary banks will assume a critical ESG role as the trusted intermediary between funds, clients and regulators.

Asset managers are already well aware of the transformative potential of market and regulatory data. Nevertheless, the challenge remains: how can they identify the data they need, how can they access it in ways that mesh with their existing data processes and formats, and how can they analyse it to extract value and shape decisions? Increasingly, answering those questions means building trusted partnerships with data and insight providers. 

Developing new services

In this data-driven environment clients expect digitalisation to increase the value and speed of depositary banking services. We are already able to offer real-time interaction with clients through user-friendly interfaces and the convenience of instant messaging. Market and regulatory data can be accessed thanks to our broad global footprint, with actionable insights drawn from markets, partners and our own knowledge hubs. 

We are building on this by developing interactive depositary banking services for clients, either using existing platforms or creating system-to-system bespoke application programming interfaces (APIs), allowing greater process integration. The goal is to offer tools capable of running client analytics on demand – with the emphasis increasingly moving to self-service supported by intelligent chatbots and customised reporting driven by user requests – as well as real-time access to data.

A depositary service that is predominantly compliance-focused is no longer enough. BNP Paribas Securities Services is building a next-generation depositary platform that will provide services which enhance the competitiveness of clients. This is a new world in which clients will expect speed, accuracy, efficiency and the ability to extract insight from data as givens. To help them seize the new opportunities arising from a fast-changing landscape, a depositary bank such as BNP Paribas Securities Services will increasingly be a key business partner for asset managers and act as a connector for the financial industry as a whole.