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Well, what a year 2020 has been so far! Britain left the
European Union at the beginning of what already seems like a long
year and then the global pandemic took hold, impacting pretty much
everyone on the planet and changing what we consider to be normal.
As a result, we have seen economies shut down overnight, affecting
every business from high street retailers and taxi drivers through
to large corporations. This in turn has impacted the financial
services industry to an extent not seen since the financial crisis.
It has happened at a time when firms are preparing for the changes
being introduced as part of IBOR reform. In short, an annus
horribilis. But could 2020 also signal the start of a
technology revolution? Being an eternal optimist, I like to think
so. Here are some of the reasons why.
Let's start with the global pandemic, a truly awful event
including loss and suffering on an enormous scale; a scenario in
which our normal routines - work, school, shopping, dining out etc.
- ground to a halt overnight. Humans by nature are creatures of
habit, whose brains rely on routine, so the pandemic has disrupted
us significantly on every level. But we did not lie down and
passively accept the situation; instead we did what humans are
remarkably good at doing: we adapted, we changed (too early to call
it an evolution). So why haven't we seen this level of adaptation
and change before?
If we look at the pandemic from a technology perspective,
outside of the financial sector, you can see why some commentators
view this as one of the most significant periods of accelerated
adoption in history. Governments have had to rely on data to keep
citizens informed with facts about the virus, and track-and-trace
technology has been created and adopted globally. Schools have
switched from classroom education to delivering lessons via video
conferencing applications. Restaurants that had never offered
take-aways have embraced delivery technology in order to survive,
and shops have followed suit.
Let's now focus on the financial services industry again.
Overnight offices were shut and people were asked to work from
home. Some who had been opposed to hot desking in the office were
asked to work from a laptop on their dining room table. Firms that
had previously frowned upon working from home had to embrace it.
In-person meetings were replaced by virtual meetings using video
conferencing software, and even trade shows and events went
virtual.
As office work became remote, it also became necessary to file
and store remotely. Cloud storage during the pandemic has increased
significantly. The ability to access, store and share files
remotely has become essential for firms as their workforces have
shifted to remote environments.
In the loans space, teams can no longer access the trusted fax
machine that has served them so well over the past 30 years, so
they have moved to electronic mailboxes and platforms that support
notice consolidation and workflow. We have even seen an increase in
firms adopting FpML and automating their notices into downstream
systems of record in order to remove the risks associated with dual
keying/manual input. It is therefore no coincidence that our notice
platform, Notice Manager, is on course for a record year for
volumes as parties look for a centralized network that allows
agents and lenders to communicate in a secure manner.
Firms have found signing documents a challenge: printing,
signing, scanning and emailing are no longer easy tasks when
working from home. They have therefore looked at ways to overcome
some of the challenges they have faced by embracing electronic
signing and workflow platforms such as our own ClearPar. During the
past 6 months we have seen a significant increase in new
institutions being onboarded onto our network. We have also even
seen new personas, such as borrowers, incorporate ClearPar into
their workflows as they adapt to no longer being able to access
their offices where they can print and sign. It is worth noting
that most onboarded borrowers have chosen to execute documents in
ClearPar via the mobile device version, so they can execute
documents on the move.
The inevitable, upcoming cycle change will also drive further
change and technological adoption. Firms will look for more
scrutiny of credit and counterparty risk as the landscape becomes
unsettled. Likewise an increase/peak in distressed volume will see
firms look to technology in order to perform simple or repetitive
tasks that will give their distressed experts much needed capacity
and allow them to focus on areas of the distressed settlement cycle
that require their level of expertise, instead of managing
exceptions. As assets become distressed, agent banks will look to
segregate themselves from any lender/borrower conflicts. As a
result, outsourcing of agent functions is likely to increase
significantly.
So where has all the tech come from to make this possible? Was
there a massive push overnight by technology elves to build all of
these tools and have them ready for lockdown in the morning?
Obviously not. This tech has - in the main - been around for years
and it is just that it is now being more broadly adopted. So what
has changed? The answer is people.
Remember my opening statement about people being creatures of
habit? As a general rule, we are comfortable with our routines and
ways of working. Many of us live by the mantra "If it isn't broken,
why fix it?". It therefore sometimes takes a seismic event, such as
the pandemic, for people to challenge what is perceived to be the
norm. Maybe it is too early to call it a technology revolution, but
we can say with some certainty that the firms that are embracing
this shift to technology will be better positioned for not only
future growth but also future change.
Posted 25 September 2020 by David Jesson, Managing Director, Loan Platforms, S&P Global Market Intelligence
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
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May 12
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