Institutional client services (ICS) providers are harnessing cloud-based technologies to develop new capabilities, including artificial intelligence (AI), as they transform their business models to suit a fast-changing global financial system.
In a bid to differentiate themselves they are seizing opportunities offered by cloud processing to “take more control over the assets they traditionally entrust to service providers”, according to a new report by Snowflake entitled “Modernizing Data and Technology for Institutional Client Services”. The report was written by A-Team Group.
“ICS providers are being expected to digitalise in lockstep with their clients,” the report states. “However, many are finding that their own technology systems are ill-equipped to do so. With often ageing or fragmented tech stacks and an over-reliance on manual workflows, ICS providers are finding it difficult to offer the tech-led services that their institutional clients want.”
Under Pressure
The sector, which provides a range of support services to institutions including custodial, trading and compliance services, is under pressure to help their clients manage wide-ranging changes to their own business operations. They must now administer a broader range of asset classes for institutions, who are also far more international in their operations. Asset servicers are also having to contend with new and ever-more complex regulatory compliance obligations.To do this, they are leveraging cloud functionality, driven largely by a lack of on-premises capabilities of their own. The Snowflake report explains that the scalability and flexibility of cloud-based services are also luring asset servicers. Additionally, cloud-native tools and technologies as well as an abundance of collaborative opportunities and data security features are attractive to ICS providers.
“This mass of increased responsibilities and the demands it makes on technology argues for better-managed data, low-friction processing, cross-jurisdictional servicing, collaboration and data sharing,” the report states. “The cloud offers a customisable solution to satisfy all of those needs.”
AI Opportunities
The report singles out cloud’s particular appeal to asset service firms that want to develop their AI prowess. Many fear they are missing growth opportunities and risk losing the “arms race” to develop and deploy potentially game-changing AI tools.
Many of their clients are already using AI for a variety of use cases, including for research and to streamline manual processes. They are expected to delve deeper into the new technologies, especially Generative AI (GenAI).
In what the report calls the “the art of the possible with AI”, it explains that “the technology opens up a world of potential that has yet to be harnessed”.
“To meet the changing demands of their clients, ICS providers will need to be able to access the sort of analytical power, customer experience improvements and operational efficiencies that AI is already bringing first adopters,” it states.
The legacy technology architectures of many ICS providers are largely unable to accommodate this important new aspect of their operations, whereas cloud can.
“All this is possible when AI has access to the data and the compute power that gives it free rein to transform operational processes,” according to the report. “And it’s only in the cloud that those optimal conditions exist for most organisations.”
- The Snowflake report “Modernizing Data and Technology for Institutional Client Services”, which was written by A-Team Group, is available to download from here.
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