ISS in conversation with SmartStream’s Nick Smith

Nick Smith, Global Head of Managed Services & Regional Head of Professional Services talks to International Securities Services.

ISS: SmartStream has gone through some major changes over the past 2 years.  Can you give us an update on what they have been?

Nick Smith: SmartStream has been continuing to engage with the market and listen to our clients. As such, our product offering has been evolving in recognition of both the pressures on costs that financial institutions have been experiencing, and the increasing regulatory demands upon the market place.

In addition to continuously investing in our software solutions, SmartStream has also been developing our Software as a Service (SaaS) offerings by building out our utilities. Financial institutions finally recognize the benefit that utilities such as those offered by SmartStream provide, from both a cost management perspective and also the benefits of leveraging highly skilled resources within a centre of excellence to deliver a high quality product.

ISS: You have been in post for less than a year.  How have you found it at SmartStream so far?

Nick Smith:I can truly say that it is exciting to be in an environment where there is so much energy, commitment and innovation to evolve our solutions for the benefit of our clients. The level of experience within SmartStream along with the drive to move the business forward is both motivating and rewarding. Everybody within the organization, at all levels, is actively involved in the group effort to continue to be a market leader.

ISS: What are your priorities for the coming year?

Nick Smith:Building out our business process outsourcing (BPO) solution within managed services is what drew me to SmartStream. As a market leader in so many areas with regards to our software solutions, this provides the perfect platform to build out our utility offering.

Currently we offer BPO solutions for back-office processing, software hosting, change-the-bank IT, run-the-bank IT in addition to level 1 and level 2 support. We have clients who subscribe to some or all of these services. For example we have hedge funds who subscribe to our hardware hosting service through to a tier 1 investment bank who subscribes to our full technology and back office processing SaaS BPO solution.

We have been launched a new location for our Centre of Excellence so that our clients may benefit from enhanced BCP resiliency and we have a third new location in the pipeline.

We have also launched a new product whereby SmartStream provides QA as a Service. Our first client will be live shortly, where SmartStream will provide the latest versions of our software solutions in a hosted environment on a continuous basis and a commitment that the client’s tests scripts will all be executed by our in-house skilled QA professionals. The benefit to the client is that they will be able to implement the very latest versions of our solutions in a very short time frame, in the knowledge that all SIT and UAT activities will already have been completed to their own specifications.

ISS: Do you think the industry is ready for the reconciliation data needed for regulations such as MiFID II?

Nick Smith: My personal view is that many banks are ready to provide the required reporting and that many banks have still a lot of work to undertake, as the deadline closes in.

However, after spending much of my career in banking I am unfortunately anticipating that the regulators will quickly identify issues with the integrity of the data being reported. I expect that there will be activity incorrectly omitted and activity incorrectly included in the reporting, resulting in challenges to the integrity of the data.

The result will be that there will be a lot of energy and financial cost expended reconciling data only after the regulators have raised flags. SmartStream has been working with a number of our clients and have developed a fully integrated solution to MiFID II reporting that ensures both compliance with the reporting requirements and just as importantly the integrity of the data being reported.

ISS: How do you see the business process outsourcing landscape changing the foreseeable future?

Nick Smith: Business process outsourcing where financial institutions have retained their legacy technology but outsourced the people, is a mature market.

What is slowly evolving is the development of the utilities whereby financial institutions not only outsource the people but they also outsource the technology. By doing this, a multi-tenanted utility is able to share the technology costs across multiple clients, reducing the overall cost-per-trade and avoid the incremental costs of having to continuously invest in their legacy technology platforms in order to remain competitive. In addition, regulatory compliance will be standardised and mitigate the risk of any one institution not being compliant.

What we have been seeing, is that in some areas there has been a limited amount of success developing managed service utilities, but industry wide efforts to build these utilities have struggled due to conflicting interests amongst the parties.

As the market continues to mature, we expect to see these utilities develop and grow rapidly. The target operating model will change for many institutions as they look to reduce their operating costs but also benefit from a structured regulatory framework.

ISS:  Are we still moving towards consolidation of managed services?

Nick Smith: The industry still has a lot of work to do, before we see significant consolidation of managed services. I believe that we will continue to see new products being brought to the market as the industry works to find the optimal solutions.

ISS:  Is the political landscape (and uncertainty) affecting your business?

Nick Smith: Some of the uncertainty in the political landscape is actually driving additional business. Taking Brexit as an example, there are so many unknowns. As a result there is a fair amount of volatility and many of our clients are taking pro-active measures to not be caught out regardless of what the politicians finally decide. This is driving financial institutions to move existing business across their legal entities, driving the need to adapt existing solutions such as reconciliations, collateral agreements etc




8.      From talking to your clients, what have you found to be their main concerns at the moment?


Every client is concerned about regulatory compliance and with good reason. Since I joined SmartStream, it has been great to see many of those clients coming to SmartStream as a trusted partner to assist with developing and delivering those solutions.


Additionally, every client is looking to stretch their investment dollars further and further. From my own perspective that reinforces my decision to join SmartStream. When I see high volume and sophisticated institutions reducing their operating costs by 40% once they go live with our SaaS products, it reinforces my belief about the long-term strategic direction of the market to move towards managed service utilities.