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“ The challenge for global custodians in this region is that their lack of local presence can make it difficult to compete with local custodians which are better positioned to manage domestic assets .” To address these challenges , global custodians are advancing their technology and adopting models akin to open banking or custody-as-a-service , allowing them to partner with local custodians to provide a centralised platform for clients , even if the local servicing is handled by other entities . While progress has been made , Rameriz argues that no player in Asia has yet perfected a model that offers the transparency and integration clients expect , leaving them to navigate multiple layers of service .
AI , VR , and beyond While advanced technologies like artificial intelligence ( AI ) hold significant potential for transforming custody services , their adoption has been slow in the sector . Ramirez attributes this gap to a combination of client needs and bank priorities , noting that custodians have traditionally taken a cautious approach to new technologies . “ Asset managers , asset owners , and other financial professionals predominantly use traditional office setups – laptops and desktops . Until there is a significant shift in how people work , such as broader adoption of AR / VR [ virtual reality ] workstations driven by certain firms , these technologies may not see widespread use in custody services . Though , Ramirez notes that that some custodians in Asia are already leveraging AI to predict and manage trade failures , leading to more effective communication with clients and proactive measures to avoid issues . While technologies like AR and VR may still be in the early stages of relevance for custody services , AI-driven solutions are gaining traction , driven by their practical benefits in enhancing operational efficiency and reducing the need for urgent problem-solving .
The future of custody in APAC Looking ahead , the custody landscape in APAC is poised for significant transformation , driven by regional economic developments and technological advancements . While the region is unlikely to achieve the same level of integration as the Eurozone , the shift towards digital assets is expected to reshape the APAC market . “ We are already seeing this with the tokenisation of commodities and bonds , which means that assets can be serviced from anywhere , reducing the need for physical custody locations ,” Ramirez predicts . Another trend that will shape the future of custody in APAC is the rise of white-label or open custody models . These models , where local banks partner with global custodians to offer branded custody services , allow global players to collaborate with local institutions and provide integrated services . He adds : " Advancements in straightthrough processing and AI will drive further changes . Processes such as corporate actions and proxy voting , which currently require manual intervention , could become fully automated , reducing human error and improving efficiency . The ideal future for custody will involve minimal manual processes , with virtual pooling of assets becoming more common in the region .” APAC is full of opportunities and the future is bright , but don ’ t fall into the illusion that this comes without its challenges .
24 Global Custodian Fall 2024