BNP Paribas Securities Services demonstrated a test version of its new blockchain-based platform for corporate event announcements at the Sibos conference for financial services in Toronto this month. This is just one example of the global custodian and securities services provider’s delivery of new technology across its business as it develops new business models and revenues.
Jean Devambez, head of new business acceleration, digital transformation at BNP Paribas Securities Services, told Markets Media: “We graded the whole organisation last summer and formed a digital transformation department. This replaces the innovation and digital lab as we are now in 100% delivery mode.”
Devambez continued that BNP Paribas Securities Services’ technology strategy has three dimensions - to transform and improve processes; to improve client experience of existing services; and to change the business and invent new business models “to roll out the bank of tomorrow.”
“The digital transformation team is working to to identify the best approach, technology and practices to address the challenges presented to our clients and ourselves,” he added.
The business, wholly owned by France’s BNP Paribas Group, has an active stream of innovations across all key operations and Devambez expects to see significant results within two years. The innovations cover a broad range of new technologies including data science, APIs, distributed ledger technologies, robotisation and artificial intelligence.
For example, BNP Paribas Securities Securities announced a partnership with Tata Consultancy Services this month for using blockchain to improve processing of corporate actions, one of the most complex areas of asset servicing due to the amount of information and the number of intermediaries involved. After testing, Corporate Event Connect, will be rolled out in phases.
Philippe Ruault, head of digital transformation at BNP Paribas Securities Services, said in a statement: “Managing and disseminating corporate event information in an accurate and timely fashion has long been a pain point for the custody industry and we are delighted to be working with TCS on this project.”
BNP Paribas Securities Services will use TCS Quartz, a blockchain-based service embedded in the vendor's core banking platform to capture and store corporate action information on a permissioned ledger. Asset servicing information, such as merger and acquisition announcements and dividend payments, will be collected from more than 90 markets, including 27 local official sources in BNP Paribas’ proprietary network.
Devambez said: “We are working with partners on blockchain as we don’t want all our eggs in one basket. In the future our organisation will act as a connector and provide interoperability between distributed ledger platforms.”
Other blockchain initiatives include BNP Paribas Securities Services working with crowdfunding firm SmartAngels to load client share registers onto a new platform. Securities issued by SmartAngels’ client companies are automatically registered on a distributed ledger, which then automatically issues e-certificates and processes investor payments.
BNP Paribas is also working with AXA Investment Managers on a blockchain-based fund distribution platform, Fund Link, which uses smart contracts to ease the flow of information between buyers and sellers, and provide new analytical tools.
Joseph Pinto, chief operating officer at AXA IM, said in a statement that the platform will create operational efficiencies as there is increasing pressure on fees. Pinto added: “The new technologies used by this platform can significantly enhance our fund distribution process and ensure we are well placed to meet the continued regulatory demand for increased transparency.”
The AXA IM collaboration is an example of the digital transformation team jointly designing a new platform with a client. Devambez said: “We set criteria for all the projects we support and co-develop new models with clients.”
BNP Paribas Securities Services is also using artificial intelligence to transform its business. The French bank estimates that up to 30% of the trades processed on behalf of asset managers fail the straight-through processing test due to counterparties holding mismatching data for the same transaction and will launch Smart Chaser, to tackle this problem.
Thomas Durif, global head of middle office products at BNP Paribas Securities Services, said in a statement: “Using predictive analysis, Smart Chaser will analyse historical data to identify patterns in trades that have required manual intervention in the past and proactively warn clients and their brokers on their live trading activity so they can take action promptly. We are already making good progress, having reached around 98% prediction accuracy.“
Development of Smart Chaser started in August last year and actual client data was used to test the concept.
BNP Paribas Securities Services is also using artificial intelligence, machine learning and business process monitoring to improve compliance and monitor increasing amounts of data more effectively. At the start of this year BNP Paribas Securities Services took a minority stake in fintech start-up Fortia Financial Solutions. Fortia was founded in 2012 and has developed Innova to help asset managers and asset owners ensure they have the right controls in place to systematically and efficiently monitor the compliance of their funds with myriad local and international regulations.
“We made a new investment in compliance regtech with Fortia and AI will completely change the way we work,” added Devambez. “The acquisition is well advanced and we will start integrating it into our existing business by the end of the first quarter of next year.”
Fortia and some of the new blockchain initiatives can be deployed quite quickly, but the replacement of large-scale market infrastructure will be more protracted.
Devambez said: “In five years our business models will have changed and we will have moved from a bilateral to a multilateral platform. We will have new business models and significant new types of revenues. However a large core of our business depends on very developed market infrastructure which will take a longer time to change.”