BNY Mellon and Deutsche Bank have jointly developed an API-enabled foreign-exchange (FX) solution that the banks say can dramatically improve confirmation times for restricted emerging market currency trades.

The digital solution, initially being applied to custody FX transactions in Korean Won, aims to reduce the pre-trade lifecycle to seconds from hours, minimising the operational burden and manual intervention that can be prevalent in emerging-market custody FX.

The solution is already live in Korea, with the Indonesian Rupiah and the Indian Rupee targeted next. Subsequently, it will be progressively rolled out to a broad range of restricted currencies, which are linked to investors’ underlying equity or fixed-income transactions.

Leveraging existing bots between the two banks for instantaneous communication to help eliminate market frictions, the solution can also bring trade remediation closer to the time of execution. The resulting benefits can also reduce price slippage for clients between the FX leg of a transaction and the equity or fixed-income security trade.

Digital innovation in FX markets is accelerating in emerging markets, particularly in Asia, because securities denominated in those currencies are increasingly being included - or more heavily weighted - in emerging market indices and exchange-traded funds (ETFs).

“We are constantly looking at ways to introduce cutting-edge technology for the benefit of our clients," said Jason Vitale, global head of FX at BNY Mellon. "With this partnership, we are not only seizing an opportunity to alter back-office processing in restricted markets, but more importantly, we are providing front-office users with faster execution and enhanced workflow transparency.”

“This is a milestone in solving a long-standing challenge in emerging markets, with broad application for the industry and our clients," said David Lynne, APAC head of Fixed Income & Currencies, and Corporate Bank, at Deutsche Bank. "This demonstrates our commitment to market leading execution, at a time when investor participation and focus on costs in these markets are increasing. The collaboration between the two organisations leverages our strengths and expertise in emerging markets, custodial FX, as well as digital work-flow and innovation.”

Transforming banking with data

This is Deutsche Bank's second high-profile collaboration of the week, following the formation of a strategic global, multi-year partnership with Google that is designed to drive a fundamental transformation of banking. The partnership should deliver cutting edge cloud services to Deutsche Bank, and also enable co-innovation between the two companies to create the next generation of technology-based financial products for clients. Both parties have signed a letter of intent and plan to sign a multi-year contract within the next few months.

The partnership will enable Deutsche Bank to accelerate its cloud transition and build on the engineering capabilities of both companies. Together with Google Cloud, Deutsche Bank will transform its IT architecture and thus generate considerable value for its clients. The multi-year transformation and optimisation of the bank’s current systems will take place in a phased approach. Both parties say they are committed to compliance with privacy and data protection regulation to maintain the confidentiality, integrity and availability of customer data and Deutsche Bank’s information assets.

With this partnership, Deutsche Bank will also gain direct access to data science, artificial intelligence and machine learning to better serve customers. Potential use cases include helping treasury clients with day-to-day tasks such as cash flow forecasting, improved risk analytics, and advanced security solutions to protect clients’ accounts. For the private banking business, digital and intuitive solutions will be the focus, to simplify the interactions between customers and employees.

“The partnership with Google Cloud will be an important driver of our strategic transformation,” commented Christian Sewing, CEO of Deutsche Bank. “It demonstrates our determination to invest in our technology as our future is strongly linked to successful digitisation. It is as much a revenue story as it is about costs.”

The decision follows intensive discussions and due diligence over the past five months. In February 2020, Deutsche Bank invited a number of major cloud service providers to propose a partnership as part of its multi-vendor cloud strategy. As part of this strategy, the bank will continue to work closely with its existing technology partners.