Custody and asset-servicing firms are hoping that the ongoing development of technologies such as blockchain and artificial intelligence will not only drive efficiencies but also serve as a catalyst to have all market participants speak the same transactional language.
That's important, sources said, as technological advances in the back and middle office might not reach their full potential if counterparties aren't communicating in the same way.
"Wouldn't it be nice to have one language to communicate across all counterparties? AI might be able to facilitate that," said Tom Howat, chief technology officer at GAM Systematic Cantab, the quantitative alternatives and long-only securities unit of GAM Investment Management AG, London.
Added Peter B. Cherecwich, executive vice president and president of corporate and institutional services at Northern Trust Corp., Chicago: "There's no reason the vast majority of asset servicing can't be automated, but that will require the standardization of data, reporting protocols and agreement on language."
Sources said the hope in the industry is that those in asset servicing find a single standardized language protocol similar to what the global banking industry did with the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, a Brussels-based bank cooperative created in 1974 that operates the world's largest bank messaging system.
"Who will be the SWIFT of blockchain?" asked Wayne Riches, director of strategy and solution management, at financial technology developer Fidelity National Information Services Inc., London. "We don't know, everyone's still looking to see who will be the leader in blockchain in the future. Once that happens, the top players will need to get together to decide" on protocol standardization. He said that's how SWIFT was created.
"It depends on what blockchain will be used for," Mr. Riches said. "That's where there are use cases. More broadly than that, we're not at the implementation stage yet. It's naive to think everyone will initially pick one system at the start."