Managing Multiple Ecosystems

The variety of new developments, whilst offering significant opportunity for the industry, has the potential to create operational fragmentation, resulting in the necessity to navigate and manage multiple ecosystems simultaneously. From this arises a need for greater industry collaboration and standardisation.

MANAGING MULTIPLE ECOSYSTEMS

We believe that the move from traditional, electronic solutions and capabilities to digital ones will not happen overnight.

It will take many years for the transition, and for a certain period after 2030, asset servicers will be responsible for managing the co-existence of heritage and digital ecosystems simultaneously. For example, distributed ledgers will exist alongside traditional CSD custody.

The question for asset servicing organisations is whether these two worlds will run in parallel, or whether the fundamentals of each world remain the same, and overlap a great deal. Their answers will impact the structure of their operational models.

Whatever their approach, asset servicers will have to keep up with the competition and the fast-evolving industry landscape. If investors allocate up to 10% of their portfolios to digital assets, for example, custodians will need to ensure that they have built the architecture to service and support that 10%. Otherwise, they may end up losing the other 90% of their business.