Visit TCS at the Demo and Meeting Pod

Experience certainty. IT ServicesBusiness SolutionsConsulting

investec indiadeploys

complete broker-dealer

solution in just nine weeks

plus n top 5 U.s. super-Regional Bank Modernizes Post-trade n emerging Market Bank achieves Global Reach in custody n insurance Repositories: How they Work, Why they Matter

Visit TCS at Stand E10

2016 Number 26

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By n Ganapathy subramaniam President, TCS Financial Solutions

Financial services: Eager to disrupt itself?

TCS BaNCS #BancsDL and #DLGateway to support distributed ledgers side-by-side with vintage systems

Financial institutions have figured out how to originate

and execute trades that entail one firm to sell a share and

another to buy the same. But it still takes two to three

days to settle the trade in most markets. Even so, there is

no guarantee that a buyer can pay for the shares, nor any

regulation in place compelling sellers to confirm, in ad-

vance, a buyer’s wherewithal to pay, even though central

counterparty clearing (CCP) entities provide some guar-

antee, keeping the chain unbroken.

What’s missing is being able to guarantee two things

in advance of a transaction: first, that sellers actually pos-

sess the assets that they claim; and second, that buyers

possess the readily-available wealth enabling them to buy

these same assets. In this age of instant gratification, it’s

time for another “KYC” – “Know Your Counterparty.”

Arthur Levitt, former chairman of Securities and Exchange

Commission, proposed this as a part of a move to same-day

settlement:

“Faster settlement would further reduce the risk of loss to

investors and intermediaries from the insolvency of other

market participants. Same-day settlement would require

market participants to ‘pre-position’ their assets and, if the

transaction involved an extension of credit, to arrange for

that credit at or before the time a trade was placed. This

would reduce ‘fails’ by several more percentage points. In

such an environment, people trading in the market could be

extremely confident that settlement would take place.”

  That proposal was almost two decades ago. Not

enough has been done to require market participants to

“pre-position” their assets and, if the transaction involves

an extension of credit, to make sure that credit is solid at

the time a trade is placed.

On the money side, transformation is taking place the

world over for instantaneous transfers of both high-value

and low-value payments.

Recently, India launched the Unified Payments Inter-

face (UPI). The new platform, a brainchild of outgoing

Reserve Bank of India Governor Raghuram Rajan, works

on single-click, two-factor authentication. A smartphone

user can instantaneously send or receive funds, 24x7,

across banks, using only a virtual address and requiring

no other sensitive information. India has prepared the

infrastructure for a cashless economy, and similar efforts

are progressing across the globe.

The markets will continue to grow and transform as

they will. Electronification will make sure that exchanges

of value happen even more rapidly for greater amounts

than ever before. Clearly, there will be more trading

activity, more trading venues and more shares and money

changing hands than ever before, with the electrons of

these electronic transactions traversing both emerging

and established markets in a flash.

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same-second——————— settlement now!

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Financial services: Eager to disrupt itself?

TCS BaNCS #BancsDL and #DLGateway to support distributed ledgers side-by-side with vintage systems

With that comes greater systemic risk until we figure

out a simple way to make sure that a buyer has the funds

on hand (again, “know your counterparty”) without hav-

ing to offload risk with some kind of complex, structured

contract. And the only way to avoid the need for securi-

ties insurance or off-loaded risk contracts is to demand

same-second settlement.

Blockchain technology appears to have the potential

to make this happen, provided there is the will to change.

Throughout the industry, blockchain has become the

centerpiece of innovation, the topic of major board dis-

cussions and a “must-do” agenda item. It seems that if you

haven’t yet made your blockchain-themed presentation

to your board, bosses or employees, you’re way behind

the times, more or less in the path of doom!!

So, we are adding our bit to the world of blockchain.

Over the last twelve months, we at TCS have invested effort

in understanding this technology, creating a sandbox envi-

ronment to test out its potential and building a “Distributed

Ledger” framework. We’ve tested out solutions for several

use cases, including Issuer Data, Know Your Customer and

Know Your Counterparty, and we’ve evaluated what these

use cases would mean for the world of settlement.

Our earlier work on a “Single-Touch Model” for settle-

ment (See TCS BaNCS Customer Newsletter #16) certainly

came in handy. We are also conscious of the vintage land-

scape of various position-keeping systems, messaging

platforms and a plethora of interfaces, along with the in-

herent operational risks of changing them quickly – mak-

ing us believe in the need for distributed ledgers to coex-

ist with legacy systems.

Many in the financial industry believe that the blockchain

technology has the potential to speed up the time needed

to securely clear financial transactions, to render intermedi-

aries and data flows obsolete, and to deliver same-second

settlement. Most financial institutions have some kind

of internally-funded initiatives to this end, and some have

invested in Fintechs and Insuretechs dedicated to the

mission of blockchain.

Why the financial industry is so eager to disrupt itself?

It beats me. Yet the banker in me wants to be ahead of the

game – to innovate by reimagining centuries-old practic-

es to the advantage of our clients.

Our new offerings – #BaNCSDL and #DLGateway – will

be launched shortly. These solutions will enable distrib-

uted ledgers and vintage systems to coexist, enabling

financial institutions to manage a smooth transition to

an integrated ecosystem. We are also looking ahead to

the need for eventual interoperability among multiple

distributed ledgers.

Welcome to the world of #BaNCSDL and #DLGateway.

hope to see you at Sibos 2016, stand E10. n

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For any inquiries: email: tcs.bancs@tcs.com Phone: +91 80 6725 6963

from the editor

It’s not easy to do an elevator pitch about TCS BaNCS. Where could

we possibly start?

We have the strongest bench of domain experts in every conceiv-

able area of technology in banking, capital markets and insurance.

We’ve built TCS BaNCS on a future-proof, bullet-proof solution

architecture as a componentized solution suite with the flexibility

to support every business opportunity with any variety of business

model in financial services.

We have customers from around the world with unmatched

breadth and variety, including over 370 banks, brokers, exchanges,

central securities depositories and insurance companies.

We have implementation teams ready to get installs up in as little as,

say, nine weeks for an institutional broker-dealer operation (see page 6).

We’ve modernized the operations of top U.S. banks (see page

10), and helped banks in emerging markets to compete with global

players (see page 12) and enabled innovative business strategies for

banks throughout Africa, Asia, Australia, Europe and the Americas

We’ve led innovation in product design, process simplification and

implementation methodologies, as seen by our #BaNCSDL and #DL-

Gateway initiatives for distributed ledger technology (see page 2)

and our recent launch of Insurance Repositories for digitization of

financial assets for Market Infrastructure clients (see page 16).

We’ve been recognized as leaders throughout the industry, accu-

mulating a large collection of awards, analyst recognitions and top

rankings worldwide.

From whatever direction you look through the prism at TCS BaNCS,

the results can be most rewarding for your firm.

We’ll be at Sibos 2016 in Geneva, and so allow me to draw on a few

Swiss-themed metaphors to describe TCS BaNCS:

l We’re like a versatile Swiss Army knife, with the most useful of

functions for every occasion.

l We’re like a tremendous Swiss Alphorn for our clients, assured

that when they sound the alarm, we’ll always come running.

l We’re like the famous Swiss Red Cross, ready to rescue a big

or small FSI facing a (business) crisis.

l We’re like the finest Swiss chocolate, leaving you with the

sweet taste of fulfillment at the completion of an endeavor

we do together.

A bit much for an elevator pitch, but perhaps the perfect length

for a scenic gondola ride to the top of a Swiss mountaintop.

See you in Switzerland!

Until next time…

Dennis Roman

Editor-in-Chief and Vice President

TCS Financial Solutions

Tata Consultancy Services

561 865 3339 office

954 806 6660 cell

561 865 3388 fax

https://www.linkedin.com/in/marketingasitshouldbedone

dennis.roman@tcs.com

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2 Financial Services: Eager to disrupt itself? TCS BaNCS to support distributed ledgers

6 Investec India Broker-dealer deploys complete solution in just nine weeks

10 Post-Trade Modernized Top-five U.S. super-regional bank deploys future-ready solution for securities settlement

12 Big Win Emerging market bank achieves parity with custody competitors

14 The Future of Custody Four transformations that will define custodian business models

16 Transition to a Digital Ecosystem Life insurance first among many innovative applications for digital repositories

18 Industry Analysts Independent research firm cites TCS BaNCS as a Leader

19 Bank of Bhutan Bank doubles transaction volumes after 10-month deployment of TCS BaNCS for Core Banking

20 IDBI Capital Online brokerage transforms operations with TCS BaNCS

21 National Employment Savings Trust UK pension scheme enrolls 100,000 employers and 3 million members

22 Events TCS BaNCS Dialogues, Upcoming Events and more

contents

About TCS Financial Solutions TCS Financial Solutions is a strategic business unit of Tata Consultancy Services. Dedicated to providing business application solutions to financial institutions globally, TCS Financial Solutions has compiled a comprehensive product portfolio under the brand name of TCS BaNCS. Our mission is to provide best-of-breed solutions that drive growth, reduce costs, mitigate risk, and offer a faster speed to market for our customers. TCS Financial Solutions delivers state-of-the-art software solutions for the banking, insurance and capital markets industries worldwide. For more information, visit us at www.tcs.com/bancs

About Tata Consultancy Services LTD (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT, BPS, infrastructure, engineering and assurance services. This is delivered through its unique Global Network Delivery Model™, recognized as the benchmark of excellence in software development. A part of the Tata group, India’s largest industrial conglomerate, TCS has over 362,000 of the world’s best-trained consultants in 46 countries. The company generated consolidated revenues of US $16.5 billion for year ended March 31, 2016 and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at www.tcs.com.

Copyright © 2016, TCS Financial Solutions. All rights reserved. No part of this publication may be reprinted or reproduced without the written permission from the editor. TCS BaNCS newsletter is provided to clients and prospects on a regular basis. TCS Financial Solutions disclaims all warranties, whether expressed or implied. In no event will TCS Financial Solutions be liable for any damages on any information provided within the magazine. The information is provided to outline TCS BaNCS general product direction. The editorial is to be used for general information purposes. The development, release, and timing of any features or functionality described for TCS Financial Solutions products remains at the sole discretion of TCS Financial Solutions.

From its inception, TCS BaNCS newsletter has been printed on paper from environmentally responsible sources.

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investec INDIABroker-dealer subsidiary of global bank deploys complete front-to-back-office solution in just nine weeks.

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By Bharat shah, Principal Consultant, TCS Financial Solutions

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credit

INVESTEC, a South African bank co-listed on the Johannesburg

Stock Exchange and the London Stock Exchange, is an interna-

tional specialist bank that provides asset management services,

wealth and investment services, and other diverse offerings for

institutional and individual investors.

In 2010 Investec opened a Mumbai office to conduct re-

search on Indian companies and to advise clients on private

placements. Through its extensive India-wide network, In-

vestec manages global investments in Indian growth com-

panies in sectors including ecommerce and clean energy.

At the start of 2015, Investec’s new objective was to

launch an institutional stock brokerage to enable foreign

investors to participate more fully in the Indian capital

markets. Investec already has broker-dealer operations

in other markets, allowing customers to invest in public

companies. The goal was to replicate these capabili-

ties into India, delivering a full-service offering to for-

eign investors with trading services including direct

market access (DMA), manually-worked orders and

algorithmic trading.

however, Investec’s existing securities trading

and settlement systems were not compatible

with the specific characteristics of India’s capital

markets. Some of the regulations and market

practices are quite different in India — for

example, marketplace participants have not

yet widely adopted the FIX protocol for ex-

changing security trading information.

at a GLancecompany

Investec Capital Services India Pvt Ltd

Headquarters

Johannesburg and London

Business challenge

To connect Investec’s global client base to the Indian

market through a complete broker-dealer offering.

solution

Integrated TCS BaNCS solution for clearing

and settlement, order management

and risk management.

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Given the unique marketplace, Investec needed to deploy a broker-

dealer solution to cater to the complex trading, risk, clearing and set-

tlement capabilities of the Indian markets within a very short time-

frame. “The outsourcing of trading as well as clearing and settlement

is not very prevalent in India, and the cash equities markets do not

yet support third-party clearing,” says Mr. Sridhar Vaidyanathan, COO

of Investec Capital Services India Pvt. Ltd., a subsidiary of Investec

Bank PLC. “Consequently, we had to search for a local product deliv-

ering those capabilities while being tightly coupled with our global

systems for seamless trade processing.”

During the selection process for the institutional broker-dealer

system, Investec management decided to limit the contenders to

those vendors who could provide a single, integrated solution for

back-office clearing and settlement, middle-office risk monitoring

and front-office trading and order management. Furthermore, the

solution had to include direct connectivity with Investec’s existing

global systems so that institutional investors could compile a total

picture of their global holdings, including Indian securities.

“If we had instead assembled a ‘sum-of-parts’ solution from three

vendors, then we would have needed to push data from three cus-

tomer databases into multiple systems,” says Vaidyanathan. “That’s

when we started looking for an integrated solution, and TCS BaNCS

fit our requirements very well.

TCS BaNCS also stood above competitors with a robust architec-

ture capable of handling high volumes at low latency to support ex-

ecution of algorithmic trading strategies. Because the solution was

deployed onto a third-party data center, Investec did not have to

invest in additional technology infrastructure.

In addition, TCS BaNCS offered a flexible approach to adapting

regulatory changes, which is critical in a fast-evolving market that

has seen at least two regulatory changes per month. “Regulatory

changes can be very drastic,” says Vaidyanathan. “TCS has demon-

strated its ability to respond to any changes in the compliance and

regulatory regimes, without delay.”

For example, regulators recently imposed new restrictions on or-

der size that limited how much an investor could invest in a given

sector on an exchange. In response to the new regulation, Investec

was able to draw upon the market knowledge of TCS subject-matter

experts in order to roll out an entirely new set of parameters. “TCS

has experts in each of the key areas of trading, settlement and risk

management, and they’ve worked in the industry and understand

our language,” says Vaidyanathan.

nine-WeeK dePLOYMentThe deployment began in 2015 and was scheduled to take three

months. From start to finish, the deployment process took just

nine weeks.

The TCS project management team played a key role in the suc-

cess of the deployment. “The project managers were stupendous

– very hands-on, able to manage multiple stakeholders in a very

composed way, and yet moving very fast and efficiently. They under-

stood the requirements and pulled together resources on our behalf

without major discussions,” says Vaidyanathan. “Also, the product was

completely fit-for-purpose, which also played a key role in the quick

deployment as no customization was required.”

Investec has been using the new solution for just under a year, and

it has already proven its robustness and scalability.

As an integrated single system for trading and trade processing,

TCS BaNCS handles high volumes with low latency with trading on

both the Bombay Stock Exchange (BSE) and the National Stock Ex-

change (NSE) of India. In addition, the solution supports algorithmic

trading and direct market access, enabling better execution for end

clients. The solution framework is future-ready, in line with Investec’s

growing business need for handling higher volumes, enabling new

segments like equity derivatives, delivering low-latency co-location

services and achieving other benefits.

From an operational standpoint, Investec has been able to handle

higher volumes without having to add significant headcount. This was

a key consideration for Investec, which wanted to build a high-volume

trading operation with a minimal operational team. “Most of our pro-

cesses have been automated, and so we’re able to scale up very easily,” says

Vaidyanathan. “We’re confident that our clients can trade with ease.” n

Mr. Sridhar Vaidyanathan, COO of Investec Capital Services India Pvt. Ltd., a subsidiary of Investec Bank PLC.

credit

Fast Factsl Investec is an international specialist bank

and asset manager that provides

a diverse range of financial products and services to a

niche client base in three principal markets, the UK and

Europe, South Africa and Asia/Australia as well as certain other

countries. Investec focuses on delivering distinctive

profitable solutions for its clients in three core areas of activity:

Asset Management, Wealth & Investment

and Specialist Banking.

l Investec India supports mid-market entrepreneurs,

corporates and private equity; and is a leading provider

of exceptional equity analysis, ideas and

execution services for investors investing

in Indian equities.

aBOUt tcs Bancs FOR secURities tRadinG and PROcessinGl Supporting institutional and retail brokerages for over 17 years

l Processes 30 percent of equity trades in local capital markets

l Front-office: Supports multiple access channels: dealing and advisory desks, web-based trading, high-speed trading terminals, streaming market data

l Middle-office: Centralized, real-time risk management across asset classes and currencies

l Back-office: Integrated capabilities for equities, equity-based derivatives, currency derivatives, securities lending and borrowing, and mutual fund distribution

l Supports retail brokerage, institutional brokerage and clearing members

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MOdeRnizedTop-five U.S. super-regional bank deploys future-ready solution for securities settlementBy daniel Garcia, Senior Consultant, TCS Financial Solutions

Alongside its regional retail banking presence, one of the top five U.S.

super-regional banks offers a full range of capital markets solutions

to corporate and institutional clients, including securities sales and

underwriting, foreign exchange, derivatives, M&A advisory and other

services. The bank also provides personal wealth management services

to high-net-worth, ultra-high-net-worth and institutional clients. Capital

markets represent a core pillar of the bank’s business, generating about

half of its net income.

In 2014, the Wealth Management group’s legacy back-office settlement

system was still based on batch processes. Risk and settlement managers

determined the firm’s settlement exposures with screen-scraping, spread-

sheets and other manual workarounds, and were unable to calculate ag-

gregate intraday financing and credit exposures or optimize settlement

obligations.

Such outdated practices, while all too common in the U.S. market-

place, have become wholly unsuited for global capital markets. Given the

movement to faster settlement times and real-time risk management to

better manage capital, those banks that fail to keep up with new technol-

ogy and industry trends expose themselves – and their clients – to higher

levels of settlement risk.

Also, there were questions about the viability of the bank’s legacy

vendor, as well as a shortage of qualified talent available to develop on

the underlying C++ technology platform. The pool of experienced IT pro-

fessionals who had been maintaining the system for years was starting to

shrink, and their specific skillsets were hard to replace.

On top of these challenges, the bank’s legacy IT solutions were not

ready to handle new and complex business requirements including

the Dodd-Frank Act, the adoption of ISO 20022, the move to a two-day

settlement cycle (T+2), and several DTCC-mandated changes to securities

processing. Further in-house development was considered, but ruled out

due to prohibitive costs that were out of line with the bank’s IT strategy.

narrowing the fieldThe bank’s search committee sought a

solution that could satisfy an extensive

set of criteria including technology

innovation, extensibility of solution,

vendor investment in the product, cost,

product fit and ongoing compliance with

industry practices and standards.

Members of the search committee

visited the New York offices of a longstand-

ing TCS BaNCS client in the U.S. providing

custody and securities services. Through

multiple interactions and client hosted

demos of the system in a live environment,

they were able to personally assess the fit

and potential value of the TCS BaNCS

solution to their own operations.

Following the visit, and reassured by the

extensive U.S. experience of TCS subject-

matter experts, the bank selected TCS in

the 4th quarter of 2014.

at a GLancecompany

Top 5 U.S. Super-Regional Bank

Headquarters

United States

Business challenge

To modernize a legacy securities processing platform

for post-trade settlement and risk management.

solution

TCS BaNCS for Securities Processing

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sOLUtiOn OveRvieWtRade caPtURe & PROcessinG:

l Capture and map trades using multiple formats and protocols

l Validate and enrich trades to meet settlement requirements

l Deliver trade authorizations

settLeMent PROcessinG:

l Settle trades in line with confirmations from DTCC and Federal Reserve

l Track and resolve failed trades

l Reconcile trade settlements and end-of-day cash obligations

l Manage settlement of internal trades

POsitiOn ManaGeMent:

l Manage real-time bookkeeping of trading positions

l Receive, process and post principal and interest (P&I) payments

OtHeR cOMPOnents:

l Maintain interfaces to local market infrastructure

l Manage core and reference data

l Provide technology architecture services

Future-ready solutionThe scope of the initiative was extensive. At

the highest level, the TCS BaNCS solution had

to streamline the bank’s post-trade securities

settlements for DTCC-eligible securities, includ-

ing equities and bonds, and for the Federal

Reserve for GNMA and FNMA securities, U.S.

Treasuries, repurchase agreements and other

financial instruments. The solution also had to

address Dodd-Frank, T+2 settlement, ISO 15022

and DTCC mandates.

After an aggressive 18-month, phased-in

implementation, the project went live over the

summer and was completed in August 2016,

on schedule and within budget.

With these completely modernized capabili-

ties on the solid foundation of TCS BaNCS for

Securities Processing, the bank is well prepared

for the future. n

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The competition for custody has intensified in virtually all of the

world’s most dynamic emerging markets.

It’s a common theme – Global custody banks rush to the

hottest markets, bringing with them foreign investments from

the largest global funds. At the same time, domestic banks

expand their respective custody offerings, making it easier for

local investors to diversify globally, and for foreign investors to

work directly with local bankers.

This combination – foreign money seeking local investments

and local money seeking foreign investments – makes for an

extremely challenging environment for local custodian banks

that fail to adapt to changing circumstances.

For a top commercial bank in one such dynamic emerg-

ing market, the situation as described above demanded an

immediate strategic response. As new competition mounted,

the bank remained a local player, providing service only to local

financial institutions in local capital markets. Furthermore, their

technology platform was based on an outdated legacy system

built around manual batch processes and a cost structure

that was no longer sustainable or scalable. As a result, their

customer experience no longer measured up to that of various

competitors’ offerings.

When the bank’s management team looked into upgrad-

ing their technology, they discovered that two of their biggest

competitors – one of the largest global banks, and one of the

up-and-coming local banks – had something in common: TCS

BaNCS. These new competitors were gaining strength on a

foundation created by the Custody and Corporate Actions solu-

tions of TCS BaNCS.

Based on the proven capabilities of TCS BaNCS and its well-

defined product roadmap, the bank’s leadership decided to

put themselves on par with the competition. By deploying

the Custody and Corporate Actions solutions of TCS BaNCS,

the bank would be able to equalize with competitors on the

technology while taking advantage of deep, longstanding rela-

tionships with local financial institutions and corporates across

key domestic industries.

cOLLaBORative MetHOdOLOGiesThe bank signed with TCS in late 2013. At that time, the TCS

team, including subject-matter experts and local market

experts, met with the executives and an implementation team

from the bank. Together, they planned out a comprehensive

“Waterfall” deployment schedule, including separate phases for

solution analysis, solution alignment, system integration, train-

ing, acceptance, rollout and support.

By the end of 2014, the bank went live, on schedule and on

budget.

In mid-2015, the bank accelerated its market growth strategy

by acquiring the domestic assets of a global bank. In order to

minimize the disruption to customers, the acquisition had to

be completed as quickly as possible. In this case, the “Waterfall”

approach would not have sufficed, as there were too many

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BiG Win: achieving parity with local and global playersTop commercial bank in dynamic emerging market matches competitors by deploying TCS BaNCS By d.K. tiwari, Principal Consultant, TCS Financial Solutions

713

uncertainties involved with managing the acquisition.

To manage the uncertainty, TCS employed “Agile” methodolo-

gies to ensure a rapid rollout. In contrast to the more measured,

sequential stages of the “Waterfall” approach to software develop-

ment, “Agile” has small, cross-functional teams working iteratively

to make incremental improvements. Analysts worked in “sprints”

to define requirements for the highest-priority items, which were

then sent offshore for development and testing. By having differ-

ent teams working throughout a 24-hour workday, TCS was able

to significantly shorten the time required to meet the bank’s busi-

ness requirements. In parallel with the development effort, TCS

also worked with the client to define the migration strategy, and

performed trial runs of the solution to ensure a smooth transition.

Through this approach, the bank was able to achieve a baseline

level of capability quickly and efficiently, while also effectively

uncovering gaps and new areas for development.

Even though the “Waterfall” and “Agile” approaches have

major differences (and avid proponents of each), TCS has the

flexibility to work with either set of implementation methodolo-

gies depending on the underlying business requirements and

with the culture and characteristics of the client organization.

TCS started working on the activities supporting the system

readiness for the acquisition in late 2015. By mid-2016, the deal

was finalized. Three months later, the acquired customers went

live on the bank’s TCS BaNCS-powered custody and corporate

actions solutions.

Drawing upon the new capabilities enabled by TCS BaNCS,

the bank now intends to recapture local market share while also

establishing a global footprint for the first time.

With their recent acquisition completed and their systems

built to scale, the bank – already a commercial banking leader in

its domestic market – is ready to pursue an expanded footprint

with exponential growth in assets under management and

customers around the world. n

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BiG Win: achieving parity with local and global players

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RegulationWith the intent to bolster banking system stability and investor

protection, regulators are focusing on operating risk and capi-

tal adequacy across the financial services industry.

That regulatory focus will cause a shift away from the cur-

rent pricing models, which are largely based on the level of

efficiency and automation by participants in a given market.

Instead, the new pricing models will be risk-based.

Custodians will have to consider several risk factors when

establishing prices:

l Creditworthiness of the underlying agent banks

l Characteristics of underlying asset classes

l Modes of trading, clearing and settlement

l Stability of market infrastructure entities involved

in trading, clearing and settlement.

Pricing will vary based on all of the aggregate risks involved

throughout the chain of custody. Activity involving higher-risk

areas will be priced at a premium. Custodians will need to de-

velop the systems and analytical capabilities to manage this

new, risk-based pricing model.

Investor protection is also a key theme for regulators, as a

growing level of pension and investment savings are leverag-

ing direct and indirect investment vehicles; in turn leveraging

a complex supply chain. Custodians are dealing with new re-

sponsibilities in terms of compliance reporting and ultimate li-

ability for their supply chains, and this is driving new models in

outsourcing, with more internalization of functions as a means

to reducing third-party dependency and risk.

anal

ysts

Four transFormations: br

eifin

g

CompetitionCustody operates with a multilayered model involving global

custodians, local custodians, and local or international cen-

tral securities depositories. All of these layers face increased

competition and potential disintermediation, and the indus-

try push toward lower end-to-end costs, more real-time data

and new technologies has forced custody players to develop

new business models. There’s significant overlap between the

activities of global custodians and local custodians, and firms

on both levels are integrating their services into more unified

propositions without the historical divisions in focus. Global

custodians are increasing the levels of internalization of local

custody, while local custodians are expanding their direct rela-

tionships with the investment community.

The organizations responding the most effectively to the

competitive trends are those that can rebundle traditional

product sets; deploy more integrated operating solutions; em-

ploy data more effectively and take advantage of their respec-

tive geographic and business footprints.

3the Future of Custody

Business models transformed by regulation, competition, market infrastructure and technologyBy Giles elliott, Principal Consultant, TCS Financial Solutions

15

4TechnologyCustodians have become huge data repositories, and have to

design new ways to commercialize that data. There’s a grow-

ing trend for fund managers looking to outsource more of

their data management to custodians, who can rapidly con-

solidate, scrub and evaluate market data feeds on behalf of

multiple clients.

Also, as fund managers automate decision-making with

robotic tools they will need to automate their back offices to

truly achieve lower cost investment solutions. In response, cus-

todians will reorient their services towards total automation

across the entire custody supply chain.

Finally, the industry is clearly fascinated with blockchain

and distributed ledgers. Blockchain has theoretical benefits in

enhanced security at a time of heightened concern on cyber-

crime, and leaner capital markets models are also driving us

to explore new solutions. The concepts are exciting, but given

the complexity of the industrial model and vested interests,

initial projects are going to be more component based rather

than holistic. n

3Market infrastructureIn Europe, T2S has brought more competition to local custo-

dians, and increased costs of operations as a result of height-

ened compliance standards. In response, CSDs are moving

away from solely offering market utility functions. Instead,

they’re expanding into higher-valued services, including ex-

panded coverage of asset classes including derivatives, and

collateral management for fund managers.

Another change in market infrastructure is the growing ac-

ceptance of utilities. In areas that do not provide competitive

differentiation, the industry is increasing support for utilities in

areas including KYC/AML compliance, derivatives clearing and

collateral management, and this will extend further into core

operating processing in the coming years. Industry players are

recognizing the benefits of collaborating around those areas,

rather than working in isolation for little benefit.

With more than 20 years’ experience in the securities services industry Giles Elliott recently joined TCS BaNCS to direct the Capital Markets

sales focus and Go-To-Market agenda. Prior to joining TCS, Giles worked for Standard Chartered Bank, HSBC, and JP Morgan Chase,

among others, both in Asia and Europe.

Giles will be presenting “The Future of Custody” at the popular SIBOS Open Theatre presentation area on Tuesday Sept. 27, 17:00-17:30.

Giles will also be presenting “The Impact of the Digital Agenda for Custodians” at the TCS booth at Sibos on Wednesday, Sept. 28 at

10:30-11:00 and again Thursday, Sept. 29 at 12:00-12:30.

the Future of Custody

16

inte

rvie

win

sura

nce

transition to a diGitaL

ecOsYsteM

Twenty years ago, many segments of the securities industry

relied upon paper documents ranging from share certificates

to prospectuses, contract notes and trade tickets. Today, it’s all

digital. For exchange-traded assets including equities, bonds,

ETFs and money market instruments, Central Securities De-

positories (CSDs) provide consolidated, secure and resilient

holding, apart from facilitating guaranteed delivery vs. pay-

ment (DvP).

Yet paper documents still circulate widely in other areas and

asset classes in national economies, some in areas more risk

heavy than in listed securities.

For example, life insurance policies are still issued on paper

in many regions. In the wake of a disaster such as a flood or an

earthquake, the problem with paper becomes evident, and it’s

following a disaster that policyholders most need protection

and assurance. When policy records are destroyed, policyhold-

ers or their beneficiaries may have trouble collecting the sum

assured due to lack of documentation. Furthermore, given a

sufficiently large calamity, the records of the insurance com-

pany could be damaged or destroyed too. The risks of lost or

unclaimed policies are entirely avoidable using digital tech-

nologies.

That’s one reason governments around the world are awak-

ening to the public benefit of having life insurance contracts

stored electronically within an Insurance Repository. In the

coming years, we expect to see the launch of Insurance Repos-

itories around the world. Already, TCS is working with organiza-

tions in India and Nigeria to implement Insurance Repositories.

Essentially, an Insurance Repository is a CSD for insurance

documents. Both facilities offer similar service capabilities,

ranging from centralized bookkeeping and settlements to KYC

verification and auditing. (For more on the comparison, read

“Insurance Repository and ‘ePolicies’” in TCS BaNCS Research

Journal #11.)

The repository concept works not just for financial instru-

ments, but for assets including any insurance policy (e.g. health

policies and medical records) and any real assets (e.g. land,

houses and vehicles).

One example with tremendous potential is a repository for

real-estate title documents, which would eliminate fraudulent

paper documentation and outdated duplicates of title docu-

ments. By giving property owners and lenders stronger assur-

ance of the validity of ownership claims on real estate, it would

become far easier to buy and sell property, and to borrow and

lend against property. This unlocks value by removing the fric-

tion involved with real estate transactions, eliminating many

kinds of fraud and reducing the overhead and risk involved

with processing paper.

Life insurance first among many innovative applications for digital repositories By R. vivekanand, Vice President, TCS Financial Solutions

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17

tHe cHanGinG ROLe OF FinanciaL institUtiOns

Once repositories are put into place, financial institutions will

have to develop new competencies and strategies for a paperless

world.

Repositories are typically government-sponsored initiatives

that require the participation of insurers in the market, and ef-

fective legislation. This affects everyone in the market, and each

organization will have to make the transition to a paperless world.

Not all will do so with the same level of success.

For insurers, the good news is that they will no longer have

to issue paper documents, pay for postage, maintain extensive

document libraries, or manage extensive workflows associated

with document storage and retrieval. The primary recordkeeping

functions will be managed by the Insurance Repository. Claims

will also be simplified, with payouts deposited directly with a poli-

cyholder upon verification of a claim.

The bad news is that many legacy insurers have become spe-

cialists at managing the legacy paper and money flow, and much

of their investment in document management and vaults – their

biggest overhead – will become unnecessary. Similar to how the

securities industry dematerialized over the past decades, now it’s

the insurance industry’s turn to shrink their operations.

Meanwhile, the introduction of Insurance Repositories will

make it easier for new players to enter the marketplace without

having to recreate an unwieldy system for managing paper docu-

ments. Legacy insurance companies are likely to see new com-

petitors with innovative business models taking advantage of

digital technology.

Insurance companies and other financial institutions will have

to prepare for the future of digital repositories in an electronic

ecosystem without paper.

The opportunity at hand is to offer repository-based services

to citizens and to help governments create a digitized environ-

ment. Financial institutions already work in concert with reposito-

ries (CSDs) for exchange-listed assets. This means that they already

have the necessary infrastructure to bring other asset classes onto

repositories, and to work with customers using those repositories.

For financial institutions with the vision to invent new value

propositions in a digital ecosystem, the future will be bright in-

deed. More importantly, the end customers of financial institu-

tions can look forward to a better future with greater financial

security available at lower cost. n

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18

anal

ysts

strategy day Guest Jost Hopperman, Vice President and Principal Analyst at Forrester Research,

participated in a day-long strategy session with TCS executives and subject-matter experts at the TCS Digital Reimagination Studio in Santa Clara, California, USA

Back row (from left to right): Ganesh Srinivasan, Rahul Kulkarni, S Samba, Shanoo Maniar, Sunil Karkera and Sathish VallatFront row (from left to right): Sri Sundar, R Vivekanand, Jost Hoppermann, Ashvini Saxena, Satya Ramaswamy and Thomas Mathew

Forrester Research, one of the most influential research and

advisory firms in the world, cited TCS BaNCS  as a leader in 

The Forrester Wave™: Customer-Centric Global Banking Platforms,

Q3 2016. The report, authored by Jost hoppermann, along with 

Christopher Andrews and Joseph Miller,  covered  TCS BaNCS 

along with eight other vendor firms.

The report said: “Today’s TCS BaNCS has various strong points:

It comes with proven business capabilities for retail, corporate,

and private banking, and its architecture builds on ingredients

like SOA, components, SOAP and RESTful APIs, and API manage-

ment. […] Reference clients expressed a high degree of satisfac-

tion with TCS, particularly when it comes to top management’s

attention to large scale projects. […] A large share of TCS BaNCS

revenues drives a well-defined strategy comprising enhance-

ments and topics such as blockchain, support of partner ecosys-

tems, and self-healing systems that will be essential for banks to

stay competitive.”

Commenting on the citation, N Ganapathy Subramaniam, Presi-

dent, TCS Financial Solutions said: “We are committed to the journey

of ‘simplicity’ in our banking platform, that results in faster roll-out,

best-in-class operating model and enviable customer experience.

We are pleased to be cited as a leader by Forrester and it is cer-

tainly a source of inspiration to continue our focus on simplifying

the technology landscape of banks through managed evolution,

adoption of cloud and digital-centric strategies.” n

http://on.tcs.com/2cqYvBQ

independent RESEARCh FIRM

cites TCS BaNCS as a Leader in Customer-Centric Global Banking Platforms

news

Bank of Bhutan deployed TCS BaNCS for Core Banking in 10

months, resulting in ability to handle increased transaction

volumes and improved success rate of delivery channel

transactions. All existing customers, accounts, lending

and internet banking subscribers were migrated from the

erstwhile Oracle FLEXCUBE system to TCS BaNCS as part of

this transformation initiative. The Bank selected TCS BaNCS

for Core Banking, a market-ready, fully componentized and

scalable solution for core and internet banking, in June

2015 and went operational in March 2016.

Mr. Pema Nadik, CEO and MD, Bank of Bhutan, said, “We

selected the TCS BaNCS solution for its superior design

and advanced breadth and depth of functionality, and in

keeping with our vision of enhancing— and enriching--

customer experience levels at our Bank. Designed around a

component model, this solution has transformed our bank-

ing technology ecosystem, empowering us to service the

evolving business needs and objectives of our customers.

The solution went successfully operational in a short span

of 10 months.

N Ganapathy Subramaniam, President, TCS Financial

Solutions, said, “We congratulate Bank of Bhutan on this suc-

cessful banking transformation exercise. The deployment

of TCS BaNCS at Bank of Bhutan signifies a critical milestone

for TCS, as the Bank is our first customer in the country. We

look forward to a long and rich partnership with Bank of

Bhutan and in deepening our relationship with the financial

services industry in Bhutan in the future.”

Bank of Bhutan is the largest and most profitable com-

mercial bank in the Kingdom Of Bhutan. Prior to the TCS

BaNCS deployment, the Bank faced challenges with slow

responses in some delivery channels, and staff had to spend

considerable amount of time in reconciling transactions

and settling customer complaints. Employees had to be

trained for long hours on common operations due to a not-

so user friendly interface that slowed customer service at

the Bank. The inability to parameterize mandated changes

to the Bank’s legacy core system caused delays in the roll

out of new products.

With this deployment, the Bank now has an enhanced

and responsive user interface and new digital banking

functionality that supports up load features. TCS BaNCS is

designed around a business component model thereby

empowering the Bank with a faster time to market for new

products alongside automating key business processes,

supporting multiple currencies and improving reporting,

auditing and compliance. With TCS BaNCS, Bank of Bhutan

was able to simplify end-of-day and end-of-period runs and

reduce manual intervention and related errors. The avail-

ability of industry-standard SOA compliant APIs facilitated

seamless integration with various customer delivery chan-

nels. The Bank is now able to respond faster across all its

delivery channels, resulting in higher transactions volumes

and greater accuracy. n

Bank of Bhutangoes operational with tcs Bancs

for core Banking in 10 monthsTransactions doubled and failure rates reduced

19

aBOUt BanK OF BHUtanBank of Bhutan Ltd. was incorporated by a Royal Charter in 1968, and is now incorporated under the Companies Act of Kingdom of Bhutan 2000. Bank of Bhutan was established as a public sector commercial bank and until the establishment of the Royal Monetary Authority of Bhutan; it also rendered the functions of the central bank in Bhutan. Bank of Bhutan started with only 20 account-holders and currently has about 400,000 accounts. The Bank was established with a paid-up capital of Nu. 2.5 million; today its paid-up capital & reserves have crossed Nu. 4 billion. Today it stands as the largest and most profitable commercial bank in the Kingdom of Bhutan with a network of 47 branches, including extension branches and an enviable network of 82 ATMs spread across the Kingdom, a growing Credit Cards business, a state-of-the-art mobile banking solution, internet banking and a dedicated Contact Centre, fulfilling the banking needs of a young and tech-savvy population, a demanding business community and the Royal Government of Bhutan.

20

new

sidBi CAPITAL

Online brokerage transforms operations with TCS BaNCS

IDBI Capital, a division of IDBI Bank Ltd., India’s youngest new-generation, public-sec-

tor universal bank, has gone operational with the Securities Trading and Processing

solution from TCS BaNCS for its online brokerage business.

With the implementation of TCS BaNCS, IDBI Capital has been able to expand its

business by offering new products, enhancing operational efficiency and improving

risk management.

IDBI Capital had embarked on a core securities transformation program to exploit

the potential of digitization, rationalize its application landscape, and simplify its

technology infrastructure. Their objectives were to improve customer centricity, sup-

port multiple channels and align with digital trading developments and trends.

As part of this transformation project, TCS BaNCS implemented its integrated front-

to-back-office brokerage solution; a comprehensive multi-asset, multi-channel solu-

tion with centralized risk management; mobile trading using iOS and Android de-

vices; and multiple bank and online depository interfaces.

Commenting on the transformation program and the implementation of TCS

BaNCS, Nagaraj Garla, Managing Director and Chief Executive Officer, IDBI Capital,

said: “We needed a robust, high-performance, integrated trading platform, which

would give us the capability to create and offer innovative solutions to our custom-

ers in an operationally efficient, cost-effective

and timely manner. A market-ready solution

that enables niche capabilities on smartphones

and tablets in this increasingly mobile and con-

tact-less trading world is what we needed. The

implementation of TCS BaNCS at IDBI Capital is

testimony to the product’s strengths, proven

capabilities and global customer footprint.”

Bharat Shah, Principal Consultant, TCS Finan-

cial Solutions, said: “TCS BaNCS has enabled

IDBI Capital to deliver an intuitive, interactive

and insightful digital trading experience across

multiple channels, thereby fulfilling its growing

business needs. IDBI Capital is leveraging the

product suite’s comprehensive functionality,

superior performance and high availability to

gain significant traction in the market.”

TCS BaNCS replaced multiple trading and

trade processing platforms at IDBI Capital with a single, front-to-back office broker-

age platform. The new solution has enabled digital trading functionality over the in-

ternet and mobile channels for retail clients. The solution is channel agnostic, allows

for trading across asset classes and facilitates a central view of orders placed across

different types of channels. n

aBOUt idBi caPitaL IDBI Capital Market Services Ltd (IDBI Capital) is a wholly owned subsidiary of IDBI Bank Ltd and is a leading Investment Banking & Financial Services Company. IDBI Capital offers a full suite of products and services to Corporate, Institutional and Individual clients. The range of services include investment banking, private equity, corporate advisory services, mergers and acquisitions, stock broking (institutional and retail), distribution of financial products, research and underwriting, among others.

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In May 2016, NEST reached a milestone: More than 100,000

employers signed up to its automatic enrollment pension

scheme, up from approximately 50,000 at the start of the

year.

Membership figures have experienced similarly rapid

growth. NEST signed up its first million members by April

2014, and two years later, the program reached three mil-

lion enrolled members.

NEST was established in 2010 as part of the UK govern-

ment’s workplace pension reforms, which require all UK

employers to enroll their eligible workforce into a qualifying

workplace pension scheme. The reforms began in October

2012 and are being introduced in stages through 2018. 

As NEST’s IT solutions partner and scheme administra-

tor, TCS is responsible for delivering outcome-based, end-

to-end administration services across all aspects of the

scheme. TCS set up the IT platforms that underpin NEST’s

operations including front and back-office, IT infrastructure

hosting and overarching management and governance of

the scheme administration. TCS BaNCS – a suite of bespoke

solutions designed for the banking, insurance, pension and

capital markets industries – sits at the heart of the NEST

scheme, with additional technology, business process and

infrastructure services also being provided by the TCS team.

The rapid growth in employer numbers is testament to

a strong working partnership between TCS and NEST. TCS

has worked in collaboration with NEST to enhance the ser-

vices and experiences offered to employers and members.

The scheme was built to be a digital-first offering for em-

ployers and members, which means that it can be quickly

and efficiently scaled up as demand increases. The digital

infrastructure in place makes it possible to continually

improve the user experience delivered through rapid de-

ployment of additional services, such as payroll integration

with IRIS, Moneysoft, QTAC and Sage platforms as well as

the wider payroll industry. These new services also include

enhanced customer service channels such as an online

help center, webchat, NEST Connect (for 3rd parties) and

interactive voice response (IVR).

helen Dean, CEO, NEST,  said: “From a standing start in

October 2012, NEST now has 100,000 employers signed

up to the scheme and more than three million members.

Managing such high volumes in such a short space of time

is no mean feat. It is vital that our IT infrastructure and digi-

tal services are able to flex and scale to meet demand as

auto enrolment continues to roll-out. The systems, process-

es and technology that TCS has developed as a pension

scheme administrator have been essential to getting us to

where we are today. Our partnership with TCS has been in-

valuable, allowing us to innovate, handle high growth and

helping us bring pension saving to millions of UK workers.

We’re delighted with the success of the scheme to date

and will be working closely with TCS as we continue to

grow our membership and develop additional offerings.”

Shankar Narayanan, Country head, UK & Ireland, TCS, said:

“As a pension scheme conceived and built in the digital era,

NEST is a fantastic example of what is possible when you

put digital technology and advanced IT infrastructures at

the heart of your organization. It simply would not have

been possible to deliver the same quality of service and

customer experience without the scalability, agility and

efficiency that a digital-by-default approach can enable.

We’re extremely proud to have been a NEST partner since

2010 and look forward to continuing our work together

to offer the UK’s most innovative, user-friendly auto enrol-

ment pension scheme.” n

NATIONAL EMPLOYMENT

savings trustUK pension scheme enrolls 100,000 employers and

3 million members on TCS BaNCS-powered solution

22

london, January 2016

new york, January 2016

singapore, march 2016

london, July 2016

new york, July 2016

tcs Bancs diaLOGUes TCS BaNCS users share best practices and contribute to product roadmap

Throughout the year, financial institution users of TCS BaNCS

are invited to meet with TCS subject-matter experts and

invited guests from industry organizations. To foster global

participation, these meetings are held successively in five

locations — Brazil, Singapore, South Africa, U.S. and U.K.

These are more than just user group meetings. These are

TCS BaNCS Dialogues.

TCS BaNCS Dialogues facilitate continuous engagement

among TCS BaNCS users through discussion topics covering

key activities including specific products, client working

groups and operational issues. Clients also exchange their

experiences and share information about benefits achieved

through continuous upgrades across the TCS BaNCS

product line. In addition, TCS product specialists dem-

onstrate new developments in TCS BaNCS, including risk

dashboards and client servicing apps.

The face-to-face meetings complement the ongoing

discussions that take place on Finterest, the online portal

for the TCS BaNCS community. Clients also exchange their

experiences and benefits achieved through continuous

upgrade(s) on the Product line.

The objectives of TCS BaNCS Dialogues are twofold:

l To provide a platform for TCS BaNCS users to share

their best practices and to discuss industry trends,

market changes and topics of common Interest.

l To influence the TCS BaNCS product roadmap with

inputs from the full range of client segments and

geographies.

In recent meetings, guest speakers have presented on

DTCC’s Corporate Actions Transformation Initiative, ISO

20022 adoption and industry enhancements to custody

services. Also, at the London TCS BaNCS Dialogues, guest

speakers from Swift have shared information about recent

updates.

Upcoming TCS BaNCS Dialogues for the 4th quarter of

2016 will be held in Johannesburg and Sao Paulo. n

even

ts

23

UPCOMING EVENTSSibos 2016September 26-29, 2016

GENEVA, SWITzERLAND

Giles Elliott from TCS Financial Solutions will be presenting

“The Future of Custody” at the Sibos Open Theater (see page 14), and

TCS subject-matter experts will be holding presentations at various

times throughout the conference at the TCS booth (Stand #E10).

Book a meeting: http://sites.tcs.com/sibos-2016/

The 6th Annual FT-TCS BaNCS Financial Leaders Dinner ForumSeptember 28, 2016

GENEVA, SWITzERLAND

Keynote address from Marcus Treacher, Global head of Strategic

Accounts at Ripple, followed by a panel discussion featuring

executives from the Monetary Authority of Singapore,

BNY Mellon and the European Payments Council.

Apply to attend: http://on.tcs.com/2cFu7uv

BAI Beacon 2016October 5-6, 2016

ChICAGO, ILLINOIS, USA

On a panel at Fintech Forward, a collaboration between

American Banker and BAI, Joe Reilly, Chief Technology Strategist

at zions Bancorporation, will join Ashvini Saxena from

TCS Financial Solutions to discuss the ongoing TCS BaNCS

implementation and how the core transformation is allowing

the bank to become more agile for digital. The Fintech Forward

panel will be held at BAI Beacon, a new event focused on

the most important issues facing financial services leaders.

TCS BaNCS is a proud to be a sponsor of BAI Beacon.

Book a meeting: sunil.robert@tcs.com

Banking ciO OUtLOOK

TCS was recognized by

Banking CIO Outlook

magazine as one of the

Top 10 Core Banking

solution providers

globally for 2016.

digital Banking 2016

TCS BaNCS was a Gold Sponsor at American

Banker’s Digital Banking Conference 2016

in New Orleans. At the event, Lee Wright

from TCS Financial Solutions demonstrated

the Online Account Opening capabilities

of TCS BaNCS.

reengineer the Bank & the digital way Forward

Fintech Forward panel featuring:Joe reilly, chief technology strategist at Zions Bancorporation

Ashvini Saxena, TCS Financial Solutions

Bai BeaconChICAgo

october 5-6, 2016