(l-r) Ajay Bali and Brice Lecoustey, partners at EY Luxembourg, caution CEOs of asset servicing companies to be wary in the next two years about the adoption of artificial intelligence, the need for scale and specialisation, retailisation of private assets and higher costs for services, in their latest report released on Wednesday. Photo: EY Luxembourg

(l-r) Ajay Bali and Brice Lecoustey, partners at EY Luxembourg, caution CEOs of asset servicing companies to be wary in the next two years about the adoption of artificial intelligence, the need for scale and specialisation, retailisation of private assets and higher costs for services, in their latest report released on Wednesday. Photo: EY Luxembourg

Luxembourg’s asset servicers are doubling down on digital investments, allocating up to 5% of revenue and prioritising client experience, while also confidently embracing AI adoption and aligning digital strategies with enterprise-wide goals amid standardisation challenges, says EY Luxembourg.

The evolving digital landscape is not only shaping customer experiences but also influencing the competitive position of asset servicers in the market. This impact is explored in the second edition of the “Impact of digital technologies on asset servicers - Luxembourg industry benchmark,” by EY Luxembourg on 17 April 2024.

Digital investments

According to the report, a notable finding is the persistent dedication of asset servicers to digital initiatives. More than half (57%) of surveyed companies in Luxembourg allocate up to 5% of their revenue towards digital projects, demonstrating a steadfast commitment to technological advancement. Additionally, these companies are planning investments in artificial intelligence, data platforms, workflow automation and data governance.

The report also highlights the successful digitalisation of half or more of operations for two-thirds of asset servicers, indicating a tangible shift towards digital transformation and the industry’s adaptability to modern technological trends.

Customer experience and AI

Customer-centricity remains a core focus, with 78% of respondents citing positive customer perceptions around client-centricity. This focus on enhancing client experience aligns with the broader trend of leveraging digital transformation to improve customer interactions and decision-making processes.

Asset servicers are quite optimistic about AI, found the report, with nearly all of them (91%) showing confidence in their firm’s capability to embrace AI adoption. Additionally, they consistently emphasise the importance of data platform modernisation due to its fundamental role in business processes. This modernisation holds potential to update legacy architectures, thus improving predictive analytics, offering personalised experiences, enhancing operational efficiency and providing strategic insights, noted EY. Nevertheless, challenges remain in standardising data flows and systems across the industry, with 73% of asset servicers encountering obstacles in creating new digital products and platforms due to a lack of standardisation.

Technology adoption and talent shortages

Asset servicers are prioritising strategic alignment with enterprise-wide goals, with 52% of companies matching their digital strategies accordingly. According to EY, collaboration and partnerships, particularly with fintech companies, are prevalent strategies to enhance digital capabilities and drive innovation within the sector.

To address talent shortages and reshape innovation approaches, asset servicers are leveraging cross-functional collaboration (64%), online courses (45%) and in-house training programmes (45%), noted the report.

Industry outlook

The report’s findings highlight the crucial role digital technologies play in shaping the future of asset servicing in the grand duchy, emphasising digitalisation’s potential for growth, cost reduction and industry consolidation. Despite this, many organisations have not yet reached the necessary level of digital sophistication to realise tangible cost and service benefits, remarked , digital emerging technologies and data solutions leader, and , asset servicing leader, lead authors of the report and partners at EY Luxembourg.

The report concludes that while digital technologies and applications are gaining popularity due to their scalability and easy integration, no single system has achieved universal acceptance across the asset servicing industry. This has resulted in a fragmented approach to technology implementation, prioritising short-term solutions over long-term value creation. However, 2024 marks a shift towards a more proactive, value-driven approach to adopting digital technologies within the industry.

The survey, conducted between December 2023 and February 2024, gathered responses from 24 asset servicing industry players in Luxembourg, including C-suite executives.

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