Update on Utilities: Current State of Affairs and Possibilities for the Future

by Arin Ray, June 29, 2015
Industry Trends
Global

Abstract

The utility model in capital markets is a new phenomenon with the potential to significantly transform how operations are carried out at financial institutions. Recently launched utilities in KYC have created a lot of interest and curiosity among several participants as they look to redesign their operations.

In the report Update on Utilities: Current State of Affairs and Possibilities for the Future, Celent discusses the progress made by several utility solutions in the Know Your Customer (KYC) space and answers a number of questions that we have received from several market participants since the publication of our previous report Emergence of a Utility Model: The Case of KYC On-Boarding Solutions.

The primary focus of the KYC utilities so far has been on getting the widest possible range of buy side clients on board, primarily in the US and UK. They are looking to add institutions from other jurisdictions in the near future. Adoption on the sell side has been limited because many sell side firms are waiting for more clarity on how the utilities will impact their internal operations, how (or if) the different utilities will interact, and which ones, if any, will emerge as a clear winner.

Multiple utilities performing the same function may be a suboptimal solution from an overall industry standpoint, but some participants feel it is better to have competition and avoid a monopoly. Key to success for a utility would be breadth of coverage of end clients, including coverage of different types of clients, as well as compliance with multiple geographies and jurisdictions.

“The KYC utilities solve the challenge of information and document collection and management, but there are other functions in the KYC value chain that banks will still need to conduct,” says Arin Ray, an analyst with Celent’s Securities & Investments practice and author of the report. “The utilities, once fully operational, will alter the role of traditional solution providers in the KYC space, and some of them have already started planning to develop new offerings around the utilities, with some considering strategic partnerships with the utilities.”

By expanding on the issues that are on top of mind for market participants, this report seeks to provide more clarity on them as well as update readers on the current state of affairs of the several KYC utilities. We also try to foresee how the multiple utilities will evolve and possibly coexist, and what their implications will be not only for KYC operations but also in other areas where the utility model may be adopted.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

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Michele Pace
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Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Asia (Tokyo)
Yumi Nagaoka
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Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

KYC Utilities: Current State of Affairs

3

 

Implications for Banks’ Internal Operations

5

 

Implications for Traditional KYC Solution Providers

6

Prospects for the Utility Model in Other Areas of Capital Markets

7

Conclusion

11

Leveraging Celent’s Expertise

12

 

Support for Financial Institutions

12

 

Support for Vendors

12

Related Celent Research

13

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