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Gauging the barometer
Gauging the barometer
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Gauging the barometer

29/09/2017

Bruno Campenon

Bruno Campenon

Head of Financial Intermediaries and Corporates

BNP Paribas Securities Services

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Last summer, BNP Paribas conducted a sell-side temperature poll to identify the key market concerns and opportunities in today’s environment

 

The scope of the poll covered risk, technology, and opportunities for revenue growth and efficiency. Over fifty industry insiders participated, primarily Heads of Operations and of Network Management.

We asked Bruno Campenon, Head of Financial Intermediaries and Corporates, BNP Paribas Securities Services, to comment on the results.

 

Question 1: Which are the two most important risks for your organisation?

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% of respondents

Bruno's view:

Political interference and new regulatory frameworks have always been high in our industry's agenda - this high score is not a surprise. We are hearing from clients that political uncertainty is becoming an even greater concern than regulatory issues. Last year’s political events in the US and the UK have added an additional level of uncertainty.

More than ever before, business agility along with a sharp regulatory understanding and local proximity with the main markets actors will be critical to survive in the increasingly changing world. BNP Paribas Securities Services can help in these areas. In particular, our regulatory memos offer practical information on the latest regulations.

The second biggest concern is cybersecurity. This new development has also been confirmed in a recent market survey of US mid-size banks and brokers. Cybersecurity knows no national boundaries and everyone in the industry is exposed to this risk. With cybersecurity attacks seemingly a regular occurrence, my prediction is that cybersecurity will be the number one risk concern next year. In any case, this must be high on the agenda of any financial company’s board.

 

Question 2: Which are the two most exciting technology developments for your organisation?

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% of respondents

Bruno's view:

Distributed ledger technologies ranked low on the poll but they have a significant potential in terms of instantly making a "single truth" securely available to all stakeholders. This shows in the number of initiatives that federate a large number of the major players in the financial industry, both from the buy and the sell-side. BNP Paribas Securities Services is launching multiple initiatives to tap into the potential of blockchain in the distribution of processes and data.

Big data and artificial intelligence (AI) are closely linked - as AI relies on quality data in order to be effective. Big data has been around for some time through other formats such as data warehouses and business intelligence. Other industries, particularly those that are close to retail customers, have been scrutinising data for many years. The financial industry can be considered a late mover in this space, but is now investing resources on data lake structures and AI algorithm to make the most of the enormous amount of data gathered each day.

Machine learning is a great example of the potential of AI. Early this year, we invested in the fintech start-up, Fortia Financial Solutions, a software company specialised in artificial intelligence, machine learning and business process monitoring. This has already led to impressive results in systematic documents review and analysis.

Finally, it comes as a surprise that cloud computing doesn’t come up as a top priority in our survey; however we are seeing increased interest and questions from clients about it, in particular outsourced, cloud-based data management.

 

Question 3: Which are the two most promising revenue opportunities for your organisation?

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% of respondents

Bruno's view:

Analytics is perceived both as a top 2 technology development and a revenue opportunity by more than half of the respondents. This is a very important opportunity for the industry. Online platforms will, no doubt, disrupt the business model of our industry. Many already exist on the FX pre-trade space, replacing voice dealings.
It is encouraging that most respondents believe that the existing, well-established business lines have the potential to continue to generate growth. It is clear that the model we have in place is not dying. It is naturally evolving. As such, we constantly need to challenge ourselves. Putting aside the operational efficiencies that can be achieved, new revenues come from the capacity to create added value for clients.

 

Question 4: Which are the two most promising efficiency projects for your organisation

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% of respondents

Bruno's view:

For me, the biggest surprise here relates to T2S, a system where very few players see untapped efficiency. Now that Wave 5 is behind us, the time is right to reconsider previous operating choices for consolidation, liquidity management and settlement efficiency.

IT systems rationalisation comes in high in the results. Many of the IT systems of our industry have been built in layers over time. Many overlap and clearly there are opportunities around their rationalisation. On the other end of the spectrum, robotics can automate repetitive tasks. One thing is certain: digital transformation is an enabler, and must be part of each firm's roadmap.

Almost one third of the respondents views outsourcing as an efficiency lever, adding flexibility and agility to their operations. Outsourcing is first a cost optimisation solution. It is also a business enabler, allowing the financial industry to benefit from investments made by their outsourcing partner. In addition to the back-office capabilities and migration requirements, service providers must go beyond cost saving capabilities and demonstrate that they are a credible advisor – providing market connectivity.

In January this year, we announced the extension of our outsourcing offer through a partnership with leading IT provider Calypso. This partnership provides investment banks with a full, end-to-end post-trade services offering across asset classes. Using Calypso’s platform, we are able to handle investment banks’ post-trade needs, from clearing and custody services to middle office services and back office services. The market feedback we have received so far indicates that achieving both higher efficiency levels and IT rationalisation is an appealing value proposition. In this time of uncertainty, banks must be agile and find innovative ways of adding value for clients.

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