Transfer agents en route to innovation or stagnation?
With the rise of fintech over the past decade, many have started to question the productivity and efficiency of the transfer agent role in the modern world and its future existence. As technology evolves, the industry is facing the need for increasing levels of automation and digital transformation. However, every challenge brings an opportunity.
According to Kevin O’Neill, Global Head of Asset Servicing at Fenergo, advanced technologies can actually help transfer agents improve their value proposition.
“By leveraging best-of-breed technology, transfer agency firms can provide a strong framework for governance, risk and control. By replacing manual compliance and onboarding processes with automation, employees can focus on value-added services and significantly reduce errors which have huge reputational, regulatory and cost implications.” Kevin O’Neill
Technology is becoming a key differentiator
While we’ve seen a major shift towards digital automation in the transfer agency sector over the past 10 years, the nature of the business is still very manual and heavily reliant on telephone, paper and face-to-face meetings for customer servicing. However, increased market compression, client demands, and fee and regulation pressure are soon expected to result in complete automation of the function. Inevitably, when this happens, technology will become a key differentiator.
Kelly Ashe, Sales & Marketing Manager at Pacific Fund Systems emphasises that:
“ The ongoing challenge for transfer agents to improve their levels of automation and efficiency, as well as respond to pressures on reducing fees, is substantial, and the threat of a game-changing disruptor entering the industry to exploit the inefficiencies and excessive costs that exist has never been higher…With evolution an inescapable fact, fund administrators must adapt their business processes and operating models to keep their services fit for purpose as asset managers become more demanding and the regulatory environment continues to mature and expand. Those that fail to keep up with the pace of change risk obsolescence.”
According to Ronan Doyle, Global Head of Product Management at RBC Investor and Treasury Services, the current COVID-19 crisis will further accelerate the digitisation process and transformation of the sector. He believes that reducing the manual burden and reimagining the customer experience will be crucial for the survival of the industry in the post-COVID world.
Distributed Ledger Technology will be a big part of the answer
When looking at the different types of technologies that are impacting the transfer agency sector, there is one that certainly stands out. Distributed Ledger Technology (DLT) has the potential to completely transform the function of the transfer agent by eliminating the middle man (e.g. the clearing organisations and the distributors) and essentially allowing investors to send their personal transaction data directly to the fund. In addition to streamlining the process of transferring and recording transactional data, DLT can also significantly improve core compliance functions such as Anti Money Laundering (AML), Know Your Customer (KYC) and fraud detection due to its decentralised, tamper-proof and transparent features.
“As the industry has grown we have seen significant automation in the transaction processing environment and this will continue, in fact, the practical implementation of distributed ledger technology (DLT) solutions at scale will materially change the way this part of the transfer agent’s role evolves…The industry still has work to do in terms of improving the proposition provided to investors and clients around on-boarding, day-to-day servicing and data/analytics.” says Doyle.
Cygnetise has used the power of DLT to digitise the process of managing authorised signatories. Critically, the secure, flexible and cost-effective application also allows for the protected sharing of signatory information between interested parties.
To learn more about Cygnetise, please email our team at info@cygnetise.com or click here to book a demo.
Sources:
http://www.assetservicingtimes.com/astimes/ASTimes_issue_244.pdf#page=19