What are the many technology demands on your clients?
Our clients are facing multiple demands on their precious technology resources today from a variety of drivers. We are all acutely aware of the vast number of regulations impacting our industry from the second Markets in Financial Instruments Directive (MiFID II), Dodd-Frank, the European Market Infrastructure Regulation, capital and liquidity related regulations, the Central Íø±¬³Ô¹Ï Depositories Regulation (CSDR) and the Íø±¬³Ô¹Ï Financing Transactions Regulation (SFTR). As if that wasn’t enough, macro-economic events like Brexit absorb a lot of time and effort.
Players in the securities finance markets also want to continue to provide excellent services to their clients today and into the future. This requires them, as well as keeping the lights on (complying with regulations), to invest in technology platforms to innovate, create a unique selling point and remain competitive. This can range from exploring new markets, developing new products for their clients, and exploiting a wider range of asset classes and transaction types to stay ahead. In addition, there is a large array of new technology to explore and take advantage of from cloud computing, distributed ledger technology (DLT), big data, artificial intelligence (AI), machine learning, robotics and the services offered from a wide range of fintech vendors.
Clients are also looking to use new business models, including the utilisation of new trading venues, central counterparties (CCPs) and gaining benefits from changes in the industry as and when they happen, such as the utilisation of non-cash collateral in the US.
Complying with regulations in the context of increasing competition, challenged margins, a strong desire to stay ahead while engaging in new technologies and service providers presents a complex set of challenges for our clients.
The pressures on cybersecurity, confidentiality and data protection have added a new layer of requirements and infrastructure. All firms have had to take a fresh look at this area in recent years and the demands are ever increasing.
The critical components for developing and implementing solutions (while achieving all of the above) are: to demonstrate real business benefits in terms of revenue enhancement, reduce cost, risk and fails and with widely defined improvements in efficiency. Ranging from headcount reduction to best use of financial assets. To ‘do more with less’, the mantra since 2008, has never been so demanding.
What approaches are clients taking to meet these demands?
Our clients have adopted a multi-pronged approach, both facing the challenges and exploiting the opportunities in today’s market place.
Decisions around whether to extend existing, often legacy, technology or to invest in a new tech stack and platform is a well-trodden path when evaluating short term requirements versus long-term benefits. This conundrum remains true today, however, with newer technologies to consider arriving at a pace and not necessarily fully road tested. The choices are harder than ever to make. Other decision points are faced when looking at implementation models. Whether considering a hosted software-as-a-service (SaaS) model, cloud or traditional server-based platform, clients are looking for the right solution for the specific use cases.
Further to the variety of choices around internal build solutions, there are myriad external service providers looking to help clients develop their technology platforms to meet the variety of business needs. Many securities finance brokers, borrowers and lenders have looked to third party vendors.
The network of providers can present clients with trusted, already built solutions that are proven to solve the problems they are challenged with. A large factor to consider with in-house builds is the technology risk around building something brand new from the ground up. Will the infrastructure choice be correct? Will the new platform meet the requirements? Will the solution be flexible enough to meet changing markets, regulation and requirements? At the outset how certain can you be about the full cost of build and on-going support costs? How can a new build project be resourced securely and consistently without opposing needs pulling staff away? Large scale builds are notoriously difficult to size from cost and time to market perspectives.
Outside the technology choices, banks are making decisions on resourcing options too. On-shore, off-shore, near-shore, outsource and a combination of two or more. The various models have their challenges and benefits.
Another question our clients have asked themselves is how best to deploy their highly skilled internal IT resource. Typically, the answer seems to be that the internal builds are kept for those solutions that banks have particular skills in, and that helps the business develop a competitive advantage—solutions that differentiate firms from their competitors.
For commoditised processes and functions that players need to execute in order to do business, it makes absolute sense to use third-party providers.
This approach also presents its challenges such as standardisation and interconnectivity between providers.
How does Pirum approach technology challenges, innovation and continually meeting client demands?
We start with having the right teams in place and by combining strong business and technical knowledge—this is key.
Pirum was founded by strong technologists with securities finance expertise and has a strong culture of questioning the status quo, challenging each other, and creating and building innovative solutions to complex problems. Highly skilled engineers bring together the highest levels of business knowledge with technical know-how to deliver services and high levels of straight-through automation for clients.
Pirum’s product owners bring deep subject matter expertise and a breadth of client relationships. Developing new products and services has included setting up design partner groups to ensure clients are kept updated and that services meet requirements. An agile (scrum) project process and frequent releases to clients means that we are able to deliver functionality and receive and incorporate feedback on a frequent basis. This enables our product teams to innovate and iterate solutions continually. This delivers the services that clients need.
Our services need to show strong business benefits to our clients as described above. Part of that is managing the costs of a solution. Delivery via the SaaS model means that the implementation and cost of ownership for clients is low. Further to this, we have made the onboarding process as painless as possible. Integration for clients is simplified because we translate data to our model, rather than requiring clients to do this for us. The SaaS model means clients don’t require software or hardware to be installed locally, nor do they face any upgrade burdens.
Investing and managing large systems projects is expensive for businesses and carries a risk of failure and/or overrun. Clients only pay for proven services once they’re available to use with their data already integrated—this removes the downside risk clients normally take on when they want to invest in software to help their business.
All of Pirum’s resources are on-shore and multi-disciplined product teams are collocated, enabling highly effective communication and minimal overhead. With SFTR, for example, we were ideally placed to deliver a market leading solution as we already had a deep understanding of the data, understanding of the regulation and can focus our post-trade team on delivering the solution.
A rich model of partnerships with other service providers within the securities finance world provides excellent connectivity and assists us with time-to-market of solutions, and reduced costs of each client needing to build the connections themselves.
Mutualisation of product, engineering and infrastructure resources means that the cost of solution delivery is much lower for each client versus an in-house project. This enables clients to focus their own technology teams on the functionality which differentiates them from competitors.
Clients need confidence in the reliability of services being delivered to them. At Pirum, we’ve built our extensive production system monitoring which alerts us of issues 24 hours a day. This benefits clients as we’re able to catch issues with their systems and resolve them directly with client IT support teams, usually before any impact is felt by the business users.
Pirum has invested in the latest tools for automated testing, automated software build and deployment. This minimises the number of incidents impacting clients and makes it easier for us to be very confident in releasing new features on a regular basis. Providing reliable service is key to our clients, so the infrastructure we’ve invested in is resilient and designed to minimise impact in the event of a disaster. We test our failover and backups multiple times a year to make sure they work and the team know what to do when a disaster happens.
Pirum is able to combine the deep experience of securities finance, a mature technology platform and significant experience with client compliance together with cutting edge technologies and innovative solutions.
Through our business model, clients can gain the benefits of Pirum’s solutions to meet many of their needs and focus valuable internal resources on getting ahead of the rest.
Through this approach, Pirum enables clients to meet the challenges and exploit the opportunities in today’s market.
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