Now that you are more familiar with what the utility model is and how it has become part of the essential plumbing of securities markets (see last week’s post), it’s time to look at why the utility model is appealing to firms. In a fast-moving industry like capital markets, the industry utility model is creating a number of benefits and opportunities for investment firms, including:
- Cost reduction through economies of scale and reduced process duplication.
- Standardization by giving the industry consistent, shared benchmarks.
- Mutualization of risk by spreading risk across all market participants.
- Increased service quality through the sharing of expertise and best practices.
Firms are also realizing that standardised functions duplicated by many organizations could be consolidated to unlock further savings. Markit & Genpact, for example, recently announced the launch of a centralized client onboarding solution to the market.
Sharing the load in post-trade processing
Post-trade processing is exactly the kind of process that’s open to consolidation. The huge sums of money spent by different investment banks to maintain largely identical processes and technology platforms could be significantly rationalized—and that’s exactly what solutions like Accenture Post-Trade Processing aim to do. They rely on the centralization and standardization of core processing across different banks and products and it’s a model that could lead to significant benefits for firms:
- Circa 20–40 percent savings in cost per trade.
- Cost avoidance through sharing costs of change and compliance.
- Improved service delivery by offering near real-time information.
The utility model will continue to be refined as it shapes itself to meet industry demands. As it transforms, what investment banks need to consider is that a utility model could be the most cost-effective way to prepare for the future, and is undoubtedly one of the biggest opportunities for firms to seize this year. To learn more visit: