The opportunity for global custodians to earn revenues from interest rates on funds held on deposit has been suppressed by a low-interest-rate environment. flow talks to State Street’s Swen Werner about how digital developments can fill this hole and drive a new direction of innovation
Founded in 1792, US-based State Street is the world’s largest custodian bank1 with a mission to settle and safe-keep investors’ assets and help them to enter new markets. It is responsible for more than 10%2 of the world’s assets, with a reach of more than 100 markets, giving it a close-up view of the world’s investments and the clients it serves and leaving it well-placed to support them in an important area: the future of money.
With the growth of the digital economy, the penetration of new technologies from fintechs into every aspect of financial services has now brought this evolution to the disruption of money itself. The opportunities to create digital forms of money are substantial and timely, as an increasing number of millennials3 are favouring cryptocurrencies. These allow them to invest more quickly, giving them more control and escaping the cost, complexity and regulatory rigidity of traditional money.
As Managing Director of Digital Products and Innovation at State Street, this has Swen Werner deep in thought, mulling key questions such as what an asset is, how it could be fully digitised and what new services his organisation could provide. His exploration is timely, given that the low interest rate environment has amplified the competitive pressure to service traditional assets.4 Also, with asset managers under increasing fee pressure, custodians may herald the entry of institutional capital into the industry, acting as the missing link investors and asset managers have been seeking for entrance into the crypto market. A key driver for State Street is innovation, and how digital developments will impact its traditional role.
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