Northern Trust (NTRS Quick QuoteNTRS ) has launched an artificial intelligence (AI) powered tool to derive unstructured investment information from alternative asset documents, in a bid to further digitize its alternative asset servicing business. This underpins the company’s efforts to enhance its asset owner clients’ experience as well as abate operational risk in the alternative asset servicing business.
The proprietary solution has been built in collaboration with Microsoft Azure Applied AI Services, which hastens time to value for companies formulating AI solutions, and business and consulting firm Neudesic. The solution transfigures important information, such as cash and stock distribution notices, capital call notices and capital account statements, from an array of unstructured formats into automated, actionable judgements for the investment teams.
The AI-powered data extraction competencies will read the saved documents as well as fund managers’ reports on holdings and operations of the alternative assets. It will also extract data points, including currencies, asset names and market value. The solution deploys two functions — document capturing and data extracting as well as creating an end-to-end, innovative, cloud-induced process adept at moving document receipt notification to digitized, accounting-ready data in a flash. This will facilitate the company to streamline the workflow and reduce the need for manual intervention.
The document capture and data extraction can be custom-built for other asset classes and trade lifecycle processes, such as derivatives and cash operations.
The digitization of alternative asset servicing is devised to provide asset owners with many worthwhile perks, including swifter and improved ramp-up experience, while investing in new assets, making them more proactive about any required strategy changes. Moreover, since alternative assets are often valued monthly or quarterly, the solution will provide hastened delivery of the accounting book of record services. The automation will also offer greater accuracy by moving from manual to automated data entries and exception management. Further, the amplified data transparency will be beneficial for the clients.
Data extraction and assimilation is the second stage of a digitization process that will ease asset owners’ access to a more accurate view of performance, liquidity and risk analytics across the multi-asset portfolios. In July 2021, Northern Trust announced about automating its document capture function in its alternative asset servicing business by rolling out a machine learning-powered capability.
Pete Cherecwich, the president of Corporate and Institutional Services at Northern Trust, said, “Automating investment data is a focus for Northern Trust, particularly for alternative assets due to their complexity and growing investor demand. Our investments in cloud technology, artificial intelligence, blockchain and machine learning will help asset owners achieve a true understanding of their assets and portfolios as a whole.”
Markedly, Northern Trust processes more than 1.5 million alternative asset documents annually, and had more than $1.6 trillion in alternative assets under custody and administration (as of Dec 31, 2020). The new solution puts another feather in Northern Trust’s hat to harness the emerging technology in automating the alternative asset servicing process, a flourishing part of its asset servicing business.
The company has been focused to tap efficiencies through digitalization. Its innovative technology-driven hedge fund administration capabilities brought to the marketplace via the Northern Trust Hedge Fund Services provide an attractive proposition to clients. Further, the implementation of the Target2-Securities strategy to provide better services to its clients is commendable.
However, it is seeing an escalation in costs due to the ongoing investments in technology, which have been flaring up compensation and equipment as well as software expenses. Notably, non-interest expenses witnessed a CAGR of 5.8% over the last five years (2016-2020), with the trend continuing in the first six months of 2021. We believe a rising trend in expenses will be a hindrance to bottom-line growth.
The stock has gained 5.8% over the past six months, outperforming 2.9% growth recorded by the industry it belongs to.
Image Source: Zacks Investment Research
Northern Trust currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps by Other Banks
A growing number of financial services organizations, including banks, are resorting to convenient, frictionless digital services for their customers and clients.
Recently, New York Community Bancorp, Inc.’s (NYCB Quick QuoteNYCB ) subsidiary, New York Community Bank, built a cutting-edge digital payment process via the development of a blockchain-induced digital marker — USD Forward (USDF) — which is the first to be used by a bank on the Provenance Blockchain. This will aid Figure Technologies, Inc. to operate the real-time secondary trading in digital shares of its stock by using its alternative trading system.
Wells Fargo & Company (WFC Quick QuoteWFC ) unveiled a new accounts receivable service, Integrated Receivables, in a bid to save the time of firms and resources on manually-applied payments. The service uses artificial intelligence, machine learning, and robotic processing to assist in streamline payments and remittance data capture, re-association, and invoice matching.
In July, Sterling Bancorp (STL Quick QuoteSTL ) announced its investment in the parent company of BrightFi, Verdigris Holdings, Inc., to expand its digital offerings, and facilitate innovation in the banking and financial industry. Sterling has also announced a Blockchain as a Service partnership with BrightFi this April.