SINGAPORE (May 24): Financial markets are often at the leading edge of transformation in a world where change is the only constant. In only one generation, many exchanges have progressed from “open outcry” trading by people on the floor of a bourse to high-frequency trading executed by computer algorithms in milliseconds.
For an investments company like BNY Mellon, the first financial institution founded in the United States in 1784, staying abreast with changes is imperative for it to remain profitable and relevant in a challenging business.
Brian Shea, vice chairman and CEO of investment services at BNY Mellon, says the firm has evolved from universal banking to focus on the core businesses of investment management, investment services, and wealth management for institutions and individuals across the world.
“We like to think of ourselves as the investments company of the world,” he says. “It’s a unique competitive advantage, as unlike universal banks which have retail, commercial and other businesses, we focus exclusively on the investment process. “
According to Shea, that business focus confers the firm with unique insights into the investment process. For example, with a client base of 75 major central banks around the world, BNY Mellon’s services may be involved in the overall management of up to 90% of the world’s foreign exchange reserves. This knowledge of market flows is parleyed into a deeper understanding of significant trends beginning to unfold in the financial world.
Fintech: boon or bane?
One of these trends that have gathered plenty of momentum is the interplay between finance and technology in what has become known as the fintech revolution. More than the dotcom boom of the 1990s, this revolution has the potential to shake up the finance industry in far-reaching and unexpected ways.
Shea says BNY Mellon has been preparing to ride the wave rather than become engulfed by it.
“We’ve been reinventing ourselves more like a technology and business solutions company,” he says. “By changing the way we work and simplifying our past technology infrastructure; by insourcing technology development and by getting a higher return on our existing investment, we’ve been able to self-fund some exciting innovations in the fintech world.”
The R&D is done in six global innovation centres around the world, working on a diverse range of areas from the design of cloud computing architectures to Big Data analytics and the Internet of Things. Three of these centres are located in the US, two in India, and the latest in London.
“One of the innovation centres is in Silicon Valley which has a unique fintech ecosystem. There is a culture of sharing there where a lot of new emerging technologies are co-developed,” Shea says. The open culture of sharing enables BNY Mellon to maintain its pulse on technologies that could be true game-changers in the fintech industry, he adds.
With the growing interest and investments into the fintech arena in Singapore, Shea discloses that BNY Mellon is evaluating the city-state as the location of its next global innovation centre for Asia-Pacific. Government agencies such as the Monetary Authority of Singapore have encouraged innovation laboratories to set up here to promote the new frontier of financial services and there is a building ecosystem of venture capital, start-up companies and entrepreneurs willing to put their ideas to the test.
Apart from investing in its innovation centres, BNY Mellon also participates in industry consortiums that allocate funds to research benefiting its participants. The consortiums the firm invests in run the gamut from ensuring the security of financial payments to building trading platforms and messaging technologies for secure communications. Some of these industry consortiums also pool members’ monies into broad areas of R&D work in the evolving fintech industry.
“Many companies think of the fintech revolution as a potential threat and to some extent that could be (true), but we think by immersing ourselves into the process and liaising with these firms, we can turn it into a business opportunity,” says Shea.
For instance, BNY Mellon recently launched an investment technology platform that is partly the joint product of its global innovation centres and software engineers employed by the firm.
Digital services on a platform
Called NEXEN, the platform employs open source, cloud-based architecture that consolidates in-house solutions with third-parties and clients onto a single system. It generates predictive data analytics and insights that allow BNY Mellon to anticipate clients’ needs in fast and flexible ways. Shea adds that the automation and scale of NEXEN are key differentiators of the platform from other systems in the market.
“In the past, it was delivered by individual business units, but now we’re delivering all those capabilities through a cohesive ecosystem in a seamless way,” says Shea. In addition to cloud-based access to BNY Mellon’s services, NEXEN also carries an “app store” that offers customised solutions and integrates software applications from third-party providers.
As the wave of digitisation sweeping through the finance industry renders older processes obsolete and leaves late-comers behind, Shea says BNY Mellon is cognisant of the trends by striving to turn threats into opportunities.
BNY Mellon will soon launch a big data analytics solution, as part of the overall suite of products on NEXEN that will enable users to optimise their management of collateral assets and raise the capital efficiency of their businesses. Shea says similar solutions have not been available in the market till now and the new solution is testament to the intellectual capital at BNY Mellon to bring products to the market that adds value throughout the investment process.
“It’s the future of our business for sure,” says Shea. “Many of our clients want to focus on their core competencies and they rely on us to deliver what I call shared economies of scale solutions to lower their cost of operations. That’s why the NEXEN strategy is important to us.”