[ D ATA ]
Custodians are sitting on a mountain
of valuable data which could be
a new revenue stream if used
properly, but as recent scandals
have shown, navigating the data
collection world can be a minefield.
T
he last few years have seen an aston-
ishing assortment of sensationalist
newspaper headlines likening big
data to ‘the new oil’, ‘the new gold’
and alarmingly ‘the new God.’ Many
custodian banks have watched technology
companies like Amazon, Google and Netflix
monetise their users’ data to brilliant effect, and
they want to imitate that success. Identifying
new revenue sources is not a nice-to-have but
a must-have for securities services whose core
custody and fund administration products are
facing huge margin pressures.
McKinsey data shows that securities services
revenues grew by only 3% per year between
2010 and 2016, as low interest rates, a relentless
ambush of regulation and fee compression took
their collective toll. In contrast, at Amazon
(founded by a former custodian) the lowest
recorded annual growth in revenue between
2012 and 2016 was an eye-watering 19.5%. It is
improbable a big data strategy of the sort imag-
ined by the custodians will yield Amazon-esque
returns, but it could open the door to revenue
diversification, or so the thinking goes.
The big data strategy at most custodians can
loosely be deduced as follows. Gather lots of
unstructured information about customers and
markets which is parked – usually unsystemat-
ically – across their businesses and use artifi-
cial intelligence (AI) technology, like robotic
process automation (RPA), to organise the
data, identifying any trends or linkages. These
insights in theory could help banks not only
develop customised products on a timely basis,
but even sell proprietary and bespoke informa-
tion and research to clients.
January 2019
Securities@Sibos
19