Is it time Transfer Agents take technology change seriously?
Transfer Agency (TA) has long been the unloved part of the asset servicing world with many providers seeing it as a necessary evil to acquire larger custody mandates. With the recent introduction of Consumer Duty, the way Transfer Agents operate has been pushed back into the spotlight, but what has really changed in the past decade?
Over the last decade the TA sector there has been a wave of consolidation with the most recent high profile acquisition being Waystone Group acquiring Link Fund Solutions, this trend does not look to change any time soon. Whilst acquisitions have been completed, little has been done to integrate these acquired businesses from a technology perspective, with many large TA's running multiple legacy systems, this has resulted in heavy duplicate IT spend for maintaining legacy applications and inefficient use of resources working on different operating models.The cost of working in this way only escalates as new regulatory requirements comes into play, this means double or triple effort and costs to further develop these legacy systems to meet new regulatory standards.
Furthermore, the demands of underlying investors for more digital mediums of interaction is higher than ever. Investors' preferences for a digital first engagement has meant many providers investing millions into developing patch work digital solutions in an aid to not be left behind. However, an investor's digital experience is directly impacted by the efficiency, quality and state of the back end TA platform.
Legacy TA systems are robust and have stood the test of time however their monolithic architecture makes it difficult for many businesses to dis-entangle applications and modernise their platform. Enhancements and upgrades to systems come at a huge cost and technology debt continues to pile on as the years pass. Another huge risk facing current providers is lack and loss of knowledge, many systems which are running in the market have been written in historic coding languages, support for these languages is a dying skill, with only a few true experts in the market remaining.
The risk associated with a big bang re-platform makes any change a huge risk for businesses and is the reason why many choose to do nothing or continue to roll out patch work fixes on top of their current systems which only adds to the larger problem. So why do businesses need to change?
New entrants in the market are challenging the status quo. With the emergence of Web3 technologies such as Blockchain and AI, new startups are developing modern, highly efficient and cost effective platforms. These new businesses are in a primary position to disrupt the TA industry. If established providers continue to sit on the fence they could quickly find themselves left in the past.
For any problem of this magnitude it is always best to start small, identify core surrounding applications which can be dis-entangled, modernised and enhanced. Re-write applications in a micro-services architecture whilst in parallel modernising the code base and enhancing the user experience. Once this has been done successfully, the model can be repeated and scaled. This process will eventually move businesses away from monolithic technology architectures and reduce the core TA platform to a simple database of which surrounding microservices applications draw data from.
Taking the first step is never easy, speak with Sunrise Technology Services today to understand how we could help you begin your technology modernisation journey.