State Street managing director Nathaniel Rand led A-Team Group’s recent Intelligent Trading Summit in New York with a keynote that opened a window onto the firm’s technology investment strategy, including core goals, key stages and crucial trends in the journey towards an evolved and efficient technology infrastructure.
Over the past few years, State Street, one of the largest trust banks in the world with $33.1 trillion in assets under custody and administration and $2.8 trillion in assets under management, and over 36,000 employees worldwide, has been working to overhaul its technology strategy with a focus on efficiency, IT and operational transformation, and cost reduction. Its in-house technology investment programme Beacon, launched in 2016, aims to digitise every aspect of the business, simplifying core business processes and reducing cost, but also leveraging new trends in technology to innovate new products, services and connections to its core client base.
Looking at the tech stack, the company has hitherto relied on mainframe applications along with numerous supporting modules to drive business processes and support its clients. But as technology evolves, business needs and client demands are also changing, which is informing the firm’s evolution.
Rand explained that in terms of the evolution of the digital landscape today, State Street is receiving requests and enquiries from both its businesses and clients about looking for insights into data. They are looking for real time, on-demand data feeds, and they are looking for State Street to support new forms of assets that are currently on the periphery but are starting to make their way into the institutional space, such as digital cash and digital securities. To address these demands, Rand said the company needs to focus on rearchitecting its core.
This company’s vision is based around three core principles: organising data, storing data, and leveraging that data to deliver technical services for State Street businesses and clients.
In terms of data management, the firm is seeking to move away from an environment based on monolithic siloed tech stacks individual to each business line, and towards a single source of truth where data is securely stored in one place. This will allow the firm to provide real-time, on-demand insights through a single representation, without worrying about replication or repetition across multiple books of record.
Rand said that cleaning the data, unifying its attributes and unlocking its power is a core component of the strategy and requires creation of a unified data architecture.
Next comes data storage. Today, State Street relies on hundreds of different services that are unique and distinct and require customised processes and tailored knowledge to support them. There is a heavy cost of supporting an environment like this, so as part of its redesign, the firm is looking to leverage the best attributes of private and public cloud infrastructure to create new storage standards.
Finally, State Street is seeking to move towards a modular applications landscape, building in-house services that can be stitched together based on client or business need, and repackaged ‘off the shelf’ to deliver tailored solutions. Rand described this as a microservice framework where business needs can be packaged together far more efficiently.
Branching out from its core three-point strategy, State Street is also looking to leverage some of the latest technology trends to bring value into its tech stack in a way that could be transformational for its clients.
Central to this is a focus on distributed ledger technology (DLT), which the firm hopes to use to reduce current inefficiencies in the movement of data, including significant time and effort to ensure the representation of data across business lines is consistent.
Rand explained how the reconciliation requirement between business lines drives operational risk, cost and the movement of data, all of which are inefficient. Instead, he sees opportunities in the use of DLT to create a single and immutable source of truth.
This could create new opportunities for internal revenue generation by reducing cost and risk, enhancing security and improving transparency. But the technology also has the potential to be extended outside the organisation, to clients and their service providers, in order to improve the efficiency of incoming data.
Talking about possibilities for new products and services, Rand noted how receiving insights around trade information earlier in the process could change the presentation of the company’s NAV product offering. Currently, the NAV cannot be calculated until information about what has been traded by clients is available, which can be the next day. DLT, said Rand, could enable the company to start producing a real-time NAV service for clients.
Cognitive computing is another key area of focus as a means of obtaining quality data that supports the provision of insights and intelligence. From an operational efficiency perspective, for example, cognitive computing can help to read and process information from unstructured data sources such as contracts, prospectuses, and investment research – which should assist the business to make faster and more efficient internal decisions.
From a client experience perspective, State Street has used cognitive computing to pilot a virtual agent programme using voice recognition technology to help direct client queries to the appropriate location. Rand explained that due to the size of State Street, clients can get lost in the organisational web. Deploying cognitive technology through virtual agents helps us to make the company feel small again.
Despite such an ambitious overhaul, State Street is taking its own path towards evolution, with a preference to build rather than buy. Rand explained that to be nimble, the company needs to be able to take core services and repackage them for different clients. Vendor lock-in, he said, can be challenging, so the focus is on building an internal infrastructure that can be adapted and evolved.