Pierre Mottion (BNP Paribas Securities Services):
Blockchain, funds and back office
Luxembourg is Europe's leading financial centre for the domicile and servicing of investment funds, but the pressure is on to remain competitive and stay ahead of rival jurisdictions says Pierre Mottion, global head of transfer agency at BNP Paribas Securities Services.
How do you see the future of the investment funds back office?
The fund industry is facing four main drivers of change. First, obviously, is regulation, and a lot has already been said about this.
Second is competition – assets managers are innovating to attract investments with new products and distribution strategies, and to protect their margins in an environment putting pressure on costs. The rise in alternative and passive funds is a good example of this trend. The third driver is investors: Europe’s pension time bomb is a big incentive to save more money, and begin as early as possible. But for this to happen, we need to ensure that people trust the financial system, while they actually place more trust in technological companies.
The last one is technology, which is creating the opportunity to launch a new generation of services and business models, capable of delivering solutions addressing regulation, competition and new investor requirements.
« To remain competitive,
to focus on high
added-value functions. »
How can you implement and manage this change?
It is all about changing the mind-set and culture within the organisation.
BNP Paribas Securities Services has its own Innovation and Digital Lab, reporting directly to our CEO, and we also work with the lux future lab. Digital transformation is not a new topic for BNP Paribas or for BNP Paribas Securities Services as we are the first financial institution to implement PLM (Product Lifecycle Management). We have already engaged with clients and senior industry executives, and we have several projects currently being developed with blockchain/DLT, data and analytics, robotics and artificial intelligence. Everyone within BNP Paribas Securities Services will, in some way, have the opportunity to contribute to innovation and digital challenges.
In this changing environment, everyone must adapt and innovate to remain at the forefront of the business.
Are blockchain and artificial intelligence an opportunity or a threat?
Luxembourg is by nature a cross-border fund domicile. The industry is servicing funds distributed across the world and keeping shareholder registers in the Grand Duchy.
The blockchain is a decentralised ledger, so it can be used by the industry to decentralise registers. It can also be a means to reduce the number of intermediaries, and provide clients with better access to information in a cost-efficient and completely auditable way, based on trust amongst participants.
Smart contracts are like small programmes in the blockchain that define the conditions for a trade to be completed, and a wide range of rules can be applied, for example regarding KYC - know your customer - or transaction manage-ment. We could even have the regulator being a participant of the chain, that would really rein-force trust! Is it the next big thing? No one knows for certain, but there is a lot of potential and it is worth being investigated.
It is an opportunity for Luxembourg to take advantage of its leading position as a global fund centre to define the conditions to make it a success, and to attract more business.
To remain competitive, Luxembourg needs to focus on high added-value functions.