Banks have long laboured in isolation to develop data management solutions that support their rapidly evolving requirements but, three years ago, a new collaboration – one of the closest of its kind to date – between Tier-1 banks and SmartStream led to the creation of Reference Data Utility (RDU). Future Banking catches up with Haytham Kaddoura, CEO of SmartStream, a key partner in the project, to talk about leadership, the role of fintech and how the SmartStream RDU is helping secure the fortunes of financial institutions in a high-pressure environment.
The financial media is always on the lookout for the latest challenges facing banks – it’s what we’re here to do. But in the eyes of straight-talking SmartStream CEO Haytham Kaddoura, when it comes to the key focus area of data and how to manage it, it’s not novelty that’s the problem.
“It’s actually the same challenge that banks have been having for some time,” he reveals. “It’s just the intensity that is constantly growing. It’s effectively a challenge around three dimensions: accuracy, consistency and timeliness.”
Intensity is the right word. With increased financial pressure as banks endeavour to deliver value to stakeholders despite a squeezed market, measures that improve data management performance, and achieve cost and time-saving efficiencies are not merely desirable but also essential.
It is one reason that technology is now seen as a major part of the bank CEO’s remit and, in Kaddoura’s experience working within the sector, the scale of that responsibility is growing. With SmartStream serving more than 70 of the world’s top 100 banks, it’s something that Kaddoura is well placed to witness.
“It’s no longer an option for CEOs to look at it; they have to act. It’s a must now,” he says. “Especially with the regulatory and cost pressures, and the efficiency that needs to be built into their operation, CEOs today are probably more liable than the CTO when something goes wrong on a technology front.”
At the same time, intimate knowledge of the nuances of data management services – however much a matter of core business today – is unlikely to be a skill boasted by many CEOs. Indeed, even CTOs may struggle in such a fast-moving field. Choosing a partner with experience – and demonstrable experience at that – is therefore vital.
“Today, global presence is very important to look for in a vendor, as well as reliability and someone with a proven track record,” Kaddoura says. “There are a lot of new firms in the market, and most of them simply don’t have the range to understand the true dynamics of client institutions on a global front. So, a vendor with global exposure to a range of financial institutions, small and large, is essential.”
These self-same qualities were vital in securing SmartStream’s selection as the data management service provider in a significant collaboration between Tier-1 banks: a project with far-reaching effect. Coming together in 2013 to consider the benefit of a utility model for data management, Goldman Sachs, JPMorgan Chase and Morgan Stanley partnered with SmartStream to create Reference Data Utility (RDU).
“What makes RDU stand out is that this is a true partnership; this is not a situation where we have banks sitting on a board, not involved in the running of the utility,” Kaddoura explains. “Our partner banks are very much involved; we get in touch over the phone or in meetings multiple times a week, at various levels, and we make sure we are well aligned with their requirement. We see this as a major industry initiative and we believe that, together with our partners, it can’t go wrong.
A rising tide
Rather than competing with each other to create individual data solutions at considerable expense and questionable effect, the RDU model is based upon the principle of market communality, allowing banks to work together to create a shareable, multi-tenanted solution. Data management across all streams – legal entity, security, instrument, corporate action and pricing data – is facilitated in a shared-service model, supporting common fixes where required.
“The costs are significantly lower to the financial institution, and so is the effort involved,” Kaddoura emphasises. “You have a credible and reliable vendor as it is our entity, and we are there continuously, which makes sense operationally and when applying upgrades.”
While in some quarters the very notion of fintech is floated as a seeming existential threat to banks, Kaddoura –
at the head of one of its leading players – instead holds to the ideology of collaboration, support and innovation that is characterised by RDU.
“It’s interesting, because it’s two sides of the same coin,” he says. “The financial services industry is facing some challenges and the fintech sector is trying to address some of them with technology. It’s a fast-moving environment and banks have to be more agile, and able to respond much more quickly to competition and to the demands of shareholders, regulators and customers.
“Technology is one of the key enablers of this and we in the fintech industry try to support bank leaderships in achieving this.”
Kaddoura’s outlook extends to his own style as a leader. With two decades of experience within investment advisory, asset management, corporate restructuring and strategy formulation, Kaddoura started his career within consultancy for public and private companies, and joined SmartStream in 2007. Drawing from this rich experience, he has long recognised the value of a “team leadership” approach.
“I don’t believe in a single point of decision-making; I have a very strong team where people are very well enabled, and I’ve always tried to support that. As much as possible, I lead from behind, and enable team members to have that authority and power to act, and then just step in when necessary.”
Safety in numbers
In SmartStream’s work on RDU, collaboration is nowhere more important than in the matter of security.
“This is undoubtedly one of our key focus areas where we’re working very closely with our partner banks, and we’re really at the top of our game,” Kaddoura says. “The collaborative effort on the security front is sizeable; we have teams from the banks visiting our sites to validate the security efforts; we of course adhere
to the guidelines set up by the financial institutions; and we closely abide by the standards that are
being set internationally.
“Together, we’re ensuring that our solutions are state of the art and bulletproof, in line with our clients.”
This clientele is for now concentrated on the sell side, with Kaddoura and his team working to address the immediate needs of RDU’s partner banks. But with discussions ongoing with several hedge funds, he anticipates the first buy-side clients will be welcomed into RDU in the first quarter of 2017.
And while the most immediate benefits are felt by the banks themselves, efficiencies and improved service will soon filter down to the customer level too, Kaddoura points out.
RDU, he feels, is proving to be a uniquely collaborative project, with very positive implications for the longer term.
“I’m really optimistic and pleased with the level of cooperation between SmartStream and the banks. It’s very different to the traditional vendor-supplier relationship that you see with other services. I think it is one of several initiatives where we are so closely aligned.
“We have all the right ingredients; we have the technology, we have the banks – the future is for us to draft.”