As we look to the coming year, TrustQuay’s Executive Chairman, Keith Hale, shares his thoughts on 3 tech trends that will shape the corporate services, trust and alternative fund administration market in 2022. On the agenda this year:
Accelerating digitalisation — “Low levels of digitalisation are no longer sustainable”
Rising client expectations — “Ease of access, speed of response and level of engagement”
An increasing focus on value — “Providing a clear business case and return on investment”
Trend 1 — Accelerating digitalisation
Within corporate services, trust and alternative fund administration firms, there is a clear acknowledgement that the industry is lagging behind other areas of financial services in terms of digital transformation. This was supported by our recent Future Focus Report which found that firms only scored themselves on average a modest 5 out of 10 for how far they had progressed on their digitalisation journey.
While this score saw no improvement on our 2020 survey, the impetus to digitalise is certainly there within the industry and we expect to see an acceleration of this in 2022 and beyond. While progress may be slow, recognition of the importance of digitalisation is clear, with a resounding of 92% of firms saying that technological innovation within the industry needs to accelerate, and half of firms planning to digitalise their business and client engagement in the next 2 years.
The status amongst many firms is an ongoing reliance on costly and inefficient manual processes to consolidate financial information for clients. However, such low levels of digitalisation are no longer sustainable – in any industry, the reality is that automation and digitalisation inevitably happen sooner or later. It is also inevitable across corporate services, trust and alternative fund administration and an opportunity for firms to reap the benefits that digitalisation and automation bring.
Trend 2 — Rising client expectations
A key beneficiary of digitalisation is the end client. As the intergenerational transfer of wealth moves to what are now digital-
native generations, expectations from these clients are high. They want the same ease of access, speed of response and level of engagement they are receiving from, say, their bank or asset manager.
If the benefits of digitalisation are the carrot, then the rising expectation of end-clients is the stick for corporate services, trust and alternative fund administrators. In our survey, we found that 8 out of 10 firms felt they could do better at delivering a digital experience for clients, and half of firms now plan to digitalise their business models and client engagement in the next two years.
As a result, increasing engagement through a client portal is now firmly on the agenda in 2022. Today, three-quarters of firms now recognise the benefits of a client portal, but so far only 16% have put a portal in place. Another 14% are in the process of implementing and a further 46% are considering doing so in the future.
We therefore expect to see increasing implementation of client portals this year as firms recognise the need to improve the end-client experience, but also the benefits that flow from optimising running costs by allowing employees to focus on other types of work that add more value, grow revenues and improve margins.
Trend 3 — An increasing focus on value
In any industry at an early stage in its digitalisation journey, many firms struggle to appraise the costs and financial benefits associated with automation and digitalisation. The corporate services, trust and alterative fund administration sector is no different in this regard.
If you look at banking, for example, KPIs to assess the return on investment from digitalisation are commonplace. These include metrics such as technology spend as a percentage of revenue, average revenue per employee, utilisation rate (in other words the percentage of time that staff spend on revenue-generating activities) and the resulting impact on enterprise value.
However, our survey found that these metrics are not well known or utilised within our industry. As a result, many firms are currently unable to fully understand or assess the return on investment delivered and the benefits that will flow through to the bottom line. This is reflected by the fact that, even though nearly all firms believe technology should be viewed as an investment in growth rather than just a pure cost, only a third of firms feel they are currently investing the right amount in innovation.
More work, therefore, needs to be done to change attitudes and fintech providers need to help by providing the tools and capabilities to make a clear assessment of the business case and return on investment. This increasing focus on value is an area that we at TrustQuay plan to help and support our customers within the course of 2022.