In an ever-changing and complex environment like financial services, staying abreast of key industry developments is critical for professionals – regardless of role, department, or function. As with many emerging trends and issues, the information brought forward in the media can be diverse and conflicting, and it’s not always simple to find or know what information is reliable and meaningful.

At ISITC, continuous education and improvement is what drives each of our initiatives and we take great pride in equipping our members with accurate, timely, and actionable insights into the latest industry issues, trends, and topics. ISITC devotes significant time and resources into understanding the emerging issues and trends we believe to be critical to our membership’s profession.

Want to get an ISITC subject matter expert’s take on an industry issue, trend, or topic? Ask ISITC by clicking the orange envelope button at the bottom right-hand corner of this page and we’ll be sure to address it below, as well as in upcoming blogs or at our next event.

Q: Given the industry's focus on developing blockchain and distributed ledger technologies (DLT), how do you think that will impact securities operations in the future? What areas of securities operations will be impacted?

A: In answering the question, it is important to acknowledge there is a difference between
open public blockchains and private permissioned ledgers.

Public blockchains facilitate the transfer of value and information amongst participants of "trustless networks." Public blockchains typically entail use of cryptocurrency and block-miners who maintain network security by contributing computing power to perform complex consensus calculations. Miners compete to be the first to solve the computational puzzle and receive the block reward. Many public blockchains prioritize decentralization of the network ahead of attributes such as privacy and transaction processing velocity.

In contrast, permissioned ledgers are “trusted networks” which may prioritize privacy and network speed over decentralization.

Permissioned ledger, a.k.a. distributed ledger technologies (DLT), may leverage different economic incentives, such as operational cost reductions. They are often used to solve for enterprise problems such as workflow inefficiencies, data management and governanc challenges, and reduction if not elimination of reconciliation activities.

Highly automated activities may not be top priorities for exploring blockchain/DLT solutions.

Rather, highly manual and document intensive activities may represent better candidates for application of DLT.

Examples of securities processing related use cases that have been promoted to production include international trade financing, private equity fund administration, and equity swaps processing.

Bank loans and collateral management also represent areas of opportunity for the industry to explore.

Q: What are your thoughts about the progress of artificial intelligence (AI), machine learning, and robotic process automation (RPA)?

A: Most of the progress our member firms are seeing is around specific use cases.

RPA is widely being adopted to reduce redundant tasks in operations, such as reconciliation, reporting, and account opening processes.

The most common use cases for AI and machine learning we know of are in fraud detection, customer service, risk management, and portfolio management (robo-advising).

We are hoping that within the next five years we will see more use cases, particularly in advancing security leveraging facial recognition or biometrics.