Leveraging technology to enhance customer experience

Securities services has experienced a great deal of innovation over the last 12 months as the industry has adapted to new ways of working. While securities services remains a relationship driven business and clients have increasingly realised that there is no substitute for face-to-face contact, they also appreciate the efforts made by custodians to meet their technology requirements.

This is evident in the digital strategy at Societe Generale Securities Services (SGSS), where understanding the client environment and requirement is the starting point for every project.

“Some customers prefer to have all services on a single platform, whereas larger clients tend to adopt a more selective approach using just some of our services” explains Yvan Mirochnikoff. “The third model is the bank-as-a-service approach where we plug as much of our delivery as possible into the client’s environment.”

Because the offer is based on open architecture, the bank can work with any technical environment. This can be time consuming at the start of a project, but it is more efficient for the customer in the long term.

“The open environment is vital because we are working with clients on a collaborative basis rather than telling them what we think they need,” says Mirochnikoff. “It allows us to interface more smoothly with our client’s systems. For instance, during COVID-19 pandemic, we have been able to on-board large portfolios, such as Aviva Investors France, entirely remotely using new digital capacities.”

The precise steps taken to determine the client’s technology requirements depend on their scale and business, explains Stewart Gladstone.

“We often approach non-clients to tell them we believe we have the optimal solution and platform for their business,” he says. “For existing clients we take time to understand their business and where the pain points and inefficiencies are and where we can add value, allowing them to potentially develop new products and services for their own clients.”

Gladstone adds that SGSS has a responsibility to identify solutions that could work for its clients.

“Some firms will have internal technology resources where they look to partners such as SGSS to work with them and the client drives the initiative,” he says. “Many intermediaries and buy side institutions don’t want the hassle of maintaining and upgrading their technology, so they may choose to fully outsource it and go onto a provider platform so they can focus on their core business.”

In this scenario, everything from execution through to post-trade and regulatory reporting can be supported end-to-end. SGSS is working on standardisation of platform interfacing and connectivity to avoid the need for intermediaries to develop and maintain multiple setups.

Mirochnikoff acknowledges the importance of securities services providers working with vendors to understand the operational and commercial potential of new technology based solutions.

“Time-to-market and the level of expertise are vital,” he says. “In order to find the best upgrade solution we sometimes work with vendors to develop a solution, as we have done with SimCorp on our CrossWise solution.”

CrossWise consists of four complementary modules - front office, trading & execution (I-DEAL), middle office and back office - which can be subscribed to either as a whole or separately, in order to adapt to the needs of investment professionals and the growth of their activity. It combines a portfolio management platform (PMS) with the support of a team of business experts to help clients secure and optimise their front-to-back processing chain.

Global fund distribution platform provider MFEX is another important partner for SGSS. In 2019, the companies signed a partnership agreement related to SGSS’s global fund trading activities in Luxembourg under which MFEX manages post-trade services related to funds.

Through this partnership, global asset managers can connect with local financial institutions that buy and hold funds, and process trailer fees.

“We have also undertaken significant development of our pan-European custodian platform, changing the architecture to enable us to offer a single platform across all countries,” says Mirochnikoff. “Vendors are accustomed to working on projects of this scale and we have worked collaboratively to develop this platform.”

As well as relationship management and day-to-day client services, SGSS can facilitate direct access to operations specialists on the custodian platform. The client project team is responsible for onboarding, continuous improvement and change requests.

SGSS is working with vendors - and particularly fintechs - on new products that use DLT as well as supporting existing and new asset classes. In April, Societe Generale issued the first structured product as a security token directly registered on the Tezos public blockchain, following on from a first covered bond security token issuance worth €100m on the Ethereum blockchain (settled in April 2019) and a second issuance worth €40m settled in central bank digital currency issued by Banque de France in May 2020.

“We have ongoing dialogue with fintechs in order to better understand what they are offering and their ability to move quickly to address specific business requirements,” says Gladstone. “We have already successfully partnered with a number of fintechs and these partnerships have influenced our approach to open architecture development.”

When asked about the level of commitment required to build a customised technology solution if an off-the-shelf alternative is unavailable, he says the first challenge is how to monetise the product.

“Some financial intermediary clients will expect to have access to this type of technology as a matter of course, whereas we may work with a buy side client to co-construct a solution in a workshop setting, which obviously demands a level of commitment from both parties,” explains Gladstone.

Streamlining the invoicing process is a major area of interest among larger intermediaries.

“Customers are looking to increase the efficiency of their operations and reduce error rates and the building blocks we have put in place are able to address these challenges,” he adds. “Discussions with the customer are vital during the planning phase to ensure we know exactly what they expect from us and our solution.”

Gladstone observes that clients are seeking a more dynamic view of their activities. For instance, many institutions find it difficult to validate the invoices they receive, so they need access to daily or even close to real time data rather than having to wait until the end of month to find out they had more fails than usual over that period.

This enables them to manage their operational risk more efficiently, which is a huge focus with central banks and regulators looking closely at resilience and resolution.

“Technology also gives the customer greater autonomy,” says Mirochnikoff. “For example, we have developed self-care services where clients can find the information they need 24/7. In the past, customers would have received reports in pdf format – now they have access to visualisation tools and can use cloud based tools to aggregate data from multiple sources.”

Artificial intelligence helps SGSS extract value from data and design new risk models to address real customer challenges. The user experience is vital, so increased automation enables the bank to offer features such as client alerts when markets move significantly.

“These technologies are already part of our digital strategy,” adds Mirochnikoff. “Looking ahead, some manual processes remain so there is work to be done to further reduce operational risk. In the asset servicing world, errors can be very expensive.”

The development of adapted working has accelerated significantly over the last 12 months. However, this remains a people business and SGSS is focused on adding value, says Gladstone.

“Technology and innovation are a driving force for much needed change in our industry,” he concludes. “Custodians can add value and can enrich a client’s experience and accelerate development across the industry as we adapt to new ways of working. However, it is people who continue to be the bedrock that relationships and partnerships are built upon.”

Article published in Global Investor on June 10^th, 2021.