9 July 2021
OP-ED by José Carlos Díaz, Cecabank's Director of Securities Services and Record Keeping. Commentary sponsored by Cecabank.
The distribution of financial products has not been immune to the digital revolution, and it is very difficult today to remember the times when investment decisions were made exclusively in the branches of banking institutions. This entire process, moreover, has been accelerated by the coronavirus crisis, which has led a substantial change in the interaction with customers, who are increasingly opting for digital platforms as opposed to direct, face-to-face dealings.
Relationship models have been impacted in all sectors, but particularly in the services sector, of which investment services are a part, and they have not been immune to the tsunami of change. Companies have had to readapt their digital strategy, as well as strengthen investments in communication channels and customer relations, with the web channel and apps becoming essential.
In order to meet these needs, companies have continued to increase investments in technology, creating securities distribution platforms where customers can make their investment decisions on how and when to invest.
However, changes have not been limited to the channel itself, but rather customers are becoming increasingly selective in terms of the type of product demanded. Thus, the democratisation of access to financial markets has generated the need to offer a product in which customers can invest globally, providing them with access to any traditional investment vehicle or those considered new generation, such as crypto-assets.
In order to meet such customer needs, the agreements or services offered by custodian banks in securities trading and settlement processes are of particular importance, providing customers with a broad product catalogue, with extensive geographical coverage, a variety of product types, and access to multiple markets.
However, when talking about financial products, we cannot overlook an aspect as important as regulation, which is the basis of the trust necessary for the proper functioning of any investment. Regulatory pressure is a key force that acts on the environment definitively, and in particular on product commercialisation processes. An example of this is the advent of MiFID II, which profoundly changed the user experience for customers.
In addition, the emergence of new securities, such as crypto-assets, anticipates new regulatory adaptations that will keep customer relationship models in continuous evolution.
We are therefore facing a scenario that combines changes in relationship channels with customers driven by digitalisation, constant attention to regulatory aspects, and the depth of the range of products demanded by customers. All this within a sector in a state of convulsion, with high pressure on costs, intense competition with new entrants, where companies are reformulating their business models by outsourcing part of the activities that were hitherto handled in-house.
Many sectors have seen how digitalisation has affected their value chain and has had consequences for their stakeholders, in some cases resulting in the phenomenon of disintermediation, the disappearance and appearance of new players of a more technological nature and of a global size, or even the displacement of the value propositions offered from one stakeholder in the chain to another.
Commercialisation activity is probably the link in the chain that has been most strongly affected by digitalisation and changes in the environment, and where the need to add value is greatest.
Custodian banks, both at national and international level, as is the case of Cecabank, are an essential partner for the creation of new value propositions for their customers in the performance of their activity, as they can take advantage of the synergies derived from the activity itself due to their high level of operational specialisation and in-depth regulatory knowledge.
By leveraging as experts in its core business of custody and settlement, the custodian bank is evolving and adapting the service proposition, covering the needs arising in commercialisation and extending its value proposition to other links in the chain. To this end, integrated securities distribution platform solutions have been developed, in white label format, which guarantee adaptation to regulatory evolutions and the depth of product range demanded by the customer, which, by integrating a strong technological component, facilitates the omnichannel strategy and the customer relationship that the current environment of social distancing and less physical contact, immediacy and personalisation requires.
