How TCS succeeds in places where the present constraints the future
- Future of Finance
- May 17, 2024
- 32 min read
Updated: Jan 29
A Future of Finance interview with Vivek Ramgopal, President of Banking, Financial Services, and Insurances Products & Platforms at Tata Consultancy Services
Tata Consultancy Services (TCS) has built a formidable presence in the global securities services industry over the 35 years that have elapsed since it signed a contract to build a computer system for the Swiss Central Securities Depository (CSD) back in 1989. Today, TCS owns a dominant share of the CSD technology market, and its TCS Bancs system is widely used by the custodian banks that are the gatekeepers to the CSDs as well. But the company has now moved far beyond the sale of software licences to provide both IT and full operational outsourcing services. Diligenta, its life and pensions outsourcing service in the United Kingdom, now looks after two in five British holders of pension plans and life assurance policies. A business which provides software products, Cloud-based technology and data hosting and processing and end-to-end operational support is not well-described as either a software vendor or a technology consultant, and certainly not as a data vendor, but its combination of businesses does look well-designed to exploit the age of blockchain. Blockchain, after all, is an Internet computing technology that can in theory digitise anything and everything into an executable data object. Accordingly, it can provide a solid foundation for financial markets as well as payments, supply chains, corporate networks, social networks, digital identities, artificial intelligence (AI) and the virtual realities of the Metaverse. Which is why TCS has also developed blockchain capabilities that enable companies to issue, trade, safekeep and service tokenised assets, and move those assets on and off and between blockchain networks. Future of Finance Co-founder Dominic Hobson asked Vivekanand Ramgopal, President, BFSI Products & Platforms, how TCS helps its clients maintain the balance between the need to service existing business, the urge to innovate and the fear of transformation.
Key Insights
The platform services provided by TCS incorporate software as a service (SaaS) but fulfil primarily operational functions on an outsourced basis and are judged by the clients not as capital investments in digital technology but in terms of the quality of the service outcomes enjoyed by their clients, as measured by Service Level Agreements (SLAs).
Quartz, the blockchain arm of TCS, provides the components needed to tokenise assets of all kinds, including token issuance, trading, settlement and safekeeping plus customer on-boarding, including completion of Know Your Client (KYC), Anti Money Laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions screening checks.
Quartz is working with clients outside the financial services industry on the application of blockchain technology to the faster processing of invoices and payments, more efficient management of contract fulfilment and provenance assurance and supply chain management, notably in the pharmaceutical industry.
Self-sovereign digital identities are a powerful use-case for blockchain technology where TCS can draw on the progress made in India, where citizens are equipped with standardised digital wallets – albeit not on blockchain – that store personal information accessible by third-party users via Application Programme Interfaces (APIs).
Quartz accepts that blockchain networks will co-exist alongside traditional networks for a long time and addresses the lack of inter-operability between blockchain protocols and between blockchain protocols and traditional financial markets with the Quartz Gateway application, which facilitates the necessary data exchanges via APIs.
The key to attracting asset managers to invest in tokenised assets is to minimise the operational complexity of moving between both traditional securities and funds markets and tokenised securities and funds markets, which is why TCS is developing systems for sell-side firms that make the seams between asset classes invisible to end-clients.
In adapting to tokenisation, central securities depositories (CSDs) face a critical choice – whether to build a separate system for tokens or turn existing systems into a multi-asset class platform – that is complicated by the fact that many of them are already pondering whether to replace core systems that have now reached the end of their useful life.
The reason that so few Proofs of Concepts (PoCs) and pilot tests go into production is that proving an innovative technology works in a narrow area is different from the total transformation of core technologies that is needed to embrace tokenisation wholeheartedly, where concerns about the risks, costs and timetable are intense.
The relatively low level of excitement about tokenisation among stock exchanges is surprising, given that (unlike CSDs) they no longer enjoy national monopolies, but it reflects a lack of conviction that tokenised securities will supplant securities and a need for investments that generate returns within three to four years not eight to ten.
The Diligenta life and pensions outsourcing business that TCS has built in the United Kingdom over the last decade – now the largest of all its businesses – has provided the firm with valuable knowledge it intends to apply in building a similar outcome-driven outsourcing utility for the international capital markets.
Internally, TCS operates as three separate, siloed businesses – a software business that manufactures and licenses software products, an information technology (IT) outsourcing business and a platform business that provides completely outsourced operational services – but externally clients can buy the services in any combination.
TCS is aiming to solve the age-old problem of inefficiency in the processing of corporate actions by focusing its efforts on automating the repair at source of the 5 per cent or less of corporate action announcements whose knock-on effects create liabilities, in timeframes sufficiently compressed to ensure that the contagion does not spread.
TCS is already incorporating predictive artificial intelligence (AI) in its market surveillance and fraud prevention products, expects to use generative AI to help users of existing products work more efficiently and to generate customised reports, and anticipates that AI will combine well with the data held on blockchain networks.
Transcript
00:14 Dominic Hobson: Hello, I’m Dominic Hobson, Co-founder of Future of Finance. My guest today is a man who needs little introduction to anyone who follows the progress of the global securities services industry. Vivek Ramgopal is president of banking, financial services and insurance products and platforms at Tata Consultancy Services [TCS], which means he leads global growth for the firm across the whole of the financial services industry. But Vivek’s responsibilities also include Quartz, the platform TCS has built to help its clients use blockchain technology. Vivek, thank you very much for taking the time to talk to the members of Future of Finance.
00:57 Vivek Ramgopal: Thank you, Dominic. My pleasure to be here with you. Glad to talk to you.
01:01 Dominic Hobson: Let’s begin with that job title. You’re running products, but you’re also running platforms. What exactly does platforms refer to in your job title?
01:12 Vivek Ramgopal: When we provide a platform, Dominic, what we do is we provide a complete service. It’s not just a product or a solution that is installed and deployed for the customer. You provide a service that’s typically SaaS [Software as a Service] and then there’s operations on top of the SaaS. So it’s what you could call as BPaaS [Business Process as a Service]. So we provide business processing and we are responsible for the outcome, for the end-outcome, rather than for just the software. The other thing that I thought I should also call out when it comes to what we provide as a platform is that we provide an SLA [Service Level Agreement]- based, outcome-based service. So our customers are predominantly focused on the outcome, they are not focused on the software. And also it tends to be much more of an OpEx [Operating Expenses]-based model than an initial licence and CapEx [Capital Expenditure]-based model. Whereas when you look at it as a product, when we provide products, we provide solutions, the focus is much more on the software, the solution, providing it predominantly provided on-premise, even today, or on Cloud, where customers have chosen the Cloud provider and we deploy it on their Cloud. So that’s the difference in that sense of why we say ‘platform’ and why we say ‘product.’ And one more thing that I would add there, Dominic, is that when you create a platform, it’s not just about TCS solutions. We also bring together partner solutions a lot more on our platform and create a complete ecosystem from which people can pick the service that they want to subscribe to.
02:43 Dominic Hobson: You rightly emphasise there the outcome, from the customer’s point of view. But you are still selling them products and therefore products has remained in your …
02:52 Vivek Ramgopal: Yes, absolutely. Because one [reason] is that we do both. There are organisations which only do one or the other, but we provide the complete service in the [inaudible] platform and in a lot of cases – [this is] particularly true, for example, with financial market infrastructure, examples like those, where customers still want to have everything on prem[ises], they want to have complete control over their infrastructure. And in those cases, our focus is so much more on the product and delivering the product to the customer’s needs.
03:25 Dominic Hobson: That’s interesting. And we’ll come back to financial market infrastructures. But before we do could we – we are called the Future of Finance – could we talk a bit more about Quartz, the TCS blockchain business? That’s, as I said at the outset, one of your responsibilities. Could you explain initially what services it’s offering in the digital asset markets? Are you offering just a kind of what I call a tokenisation engine, in other words, an issuance and distribution tool for the tokens? Or are you offering a full service with all the trading, the settlement, the custody, the asset servicing as well? What does Quartz do for customers?
04:01Vivek Ramgopal: Quartz offers the full service, Dominic. It offers service across the spectrum of what you could call as markets and what you could call as the future of markets in that sense, for tokenised securities, all kinds of tokenised assets, if I may. The idea behind creating Quartz differently from what we have created in TCS Bancs is that Quartz leads with innovation. It is at the cutting edge in terms of technology. Secondly, we also create pods in the form of point solutions. So you’re not talking about larger core systems, you’re talking about disaggregated point solutions that you can deploy- be it for tokenisation; it could be clearing and settlement, depository; we spoke about trading; we do KYC [Know Your Client] and on-boarding of customers. And KYC is a very important part of the value chain, and we believe that it can be so much more of, you could say, a DLT [Distributed Ledger Technology]-led space, because KYC, obviously, all of us have too much data floating around. So in that sense, we provide the complete gamut of solutions and also across asset classes. So that’s how we have, you could say, put together a set of solutions around Quartz.
05:19 Dominic Hobson: Now, people like me, of course, tend to associate TCS with the financial services industry, because that’s what we’re interested in. But you’ve always had a business outside financial services, and I know that Quartz is not exempt from that. You’re looking for clients for the blockchain products in health and energy and manufacturing. What sort of use-cases are you finding there, and do they have relevance for the financial services industry?
05:46 Vivek Ramgopal: Yes, yes. You see, actually, because of the fact that financial services tends to be the largest of the TCS verticals, and also our maturity is very high in financial services compared to a lot of others. We started, you know, we started everything in a sense with financial markets and financial services, and some of us have that in our DNA. So, you know, it tends to go that way. Even today on Quartz, the majority of our customers are in financial services. So while we have created solutions around tokenised markets, like I just said, Dominic, we’ve then expanded into areas of banking, KYC [Know Your Client], then we have expanded into CBDC [Central Bank Digital Currency] as CBDC becomes more important. In parallel, as we created, and as we looked at the eco-systems that we need to create in order to make a blockchain-based solution or a distributed solution successful, we went ahead and looked at different spaces which went beyond financial services. And, for example, there is provenance that you look at; there is managing the entire lifecycle in a supply chain environment. We have large supply chains in a lot of companies, including pharma[ceutical] companies. We have done some very interesting work with Roche, for example. So when we look at those cases, there are some very specific, nuanced examples that are there for DLT [Distributed Ledger Technology], which are very different from what you would get in the financial industry, where provenance is not anywhere near as important. Managing the supply chain, making the supply chain more efficient is not as important. So those are examples that we picked up along the way. One other area is contract management, contract authoring, contracts themselves – how you manage the contract, manage it more efficiently. Just the other day I was reading that governments are putting pressure to get money faster to small and medium enterprises because their liquidity is at such a premium. And then a lot of them tend to do bill discounting and aspects like that to get cash out. So how do you make it a lot more efficient? How do you make sure that the whole process of getting money for a small industry is not 120 days, 150 days – how do you compress it? So those are areas which we are also looking at to see if DLT gives you the certain sense of security of the certificate or the invoice for you to be able to process the payment faster. Lastly, and I think this is also a future area, is how do we look at self-sovereign identity? In a sense, you could even say it is aligned to KYC in some manner. How do we look at self-sovereign identity, what we do ourselves, as a way in which you could manage identity so much better, proof of identity, so much better as we go into the future. So these are different, you could say, examples of business processes, use-cases that we have picked up, which are very different from what we do in financial services. But to your specific question on their connection to financial services or possible applicability one day to financial services, I think it’s clearly there, particularly in two areas. One is when it comes to identity. I think there is, you know, already identity is becoming digital. There’s potential to make one KYC in a country, make the identity digital and make it kind of something in which we can decide how to share the details in one uniform form for ourselves and then every financial institution gets it. So I think identity is a very powerful use-case. The other one also, I would say, is the whole trade lifecycle and bill discounting. I think there was a lot of interest in trade [finance] when we started, but then if you look at the whole cycle of contract management to trade lifecycle, trade finance, and then to bill discounting, I think the potential for compressing that and making it more efficient across the financial value chain is higher. So I would call these out as possibly the two big examples.
09:49 Dominic Hobson: I’m very interested that you highlight digital identity as an opportunity, because at Future of Finance we got very excited about that as a solution to that KYC [Know Your Client] problem, which you’ve mentioned more than once in this conversation. Financial institutions are spending hundreds of billions of dollars a year, often duplicating their own work, let alone the work of other organisations. It seemed to us that digital identities were [a solution]. But it also seemed to us … But I know India has a particular experience here, which may be relevant, but it seems to be very difficult to get … For this idea to get traction in North America and Western Europe. Clearly you see digital identity as a major contributor to efficiency here and an opportunity for you, and you’re doing some work as TCS to help it happen, but what do you think is required for the idea to break through into the other developed financial markets?
10:49 Vivek Ramgopal: I think one thing which is not there in a lot of markets is some form of, you could say, national level digital wallet, right? I think if there is, if there is a wallet, you know … That’s where India has been ahead of many countries. I think if you have digital wallets … Wallets are also okay, as long as they are standardised. You cannot have 20 wallets; you can have two or three. But if you have standardised wallets in which you can keep your identity, which everybody is aware of and everyone has an API [Application Programme Interface] to access, then I think this will happen a lot more than what it does today. I think the power of digital wallets and digital identities has not been well understood in a lot of markets. I think it’s probably you know, I think the benefit that India has in a lot of these cases is that when you’re not having one form of technology, your ability to leapfrog is so much higher. And in a country like India, the advantages of digital technology are being used to leapfrog – it goes without saying. But then when you have had national IDs [Identities] for a long time, like the Social Security number and other such IDs, and when you have a particular way of handling it, I think they are not getting digitised faster. But, you know, on the subject of DLT [Distributed Ledger Technology], you know, the national IDs in India are not on blockchain. For a lot of countries, I would say, you know, I think when they digitise their national IDs, their Social Security numbers, I think it is a no-brainer that they should go to DLT straight away. I mean, the technology lends itself so beautifully for that. I think it would be a travesty if we do not use it and leverage it.
12:30 Dominic Hobson: Another obstacle to blockchain getting traction has been this lack of interoperability, most obviously between the different blockchain protocols, but also between the blockchain networks and the traditional financial markets. This has really emerged as a pretty large obstacle to the growth of digital asset markets. And I know that Quartz has developed a solution that facilitates that interaction, not just between the protocols, the blockchain protocols, but between those blockchain networks and traditional markets. Can you tell us a bit about that? Because it’s clearly an important breakthrough in helping digital asset markets take off.
13:09 Vivek Ramgopal: Yes. See, Dominic, for us, from the outset, inter-operability was a need. I think we always felt that even though there was a lot of talk about disintermediation and who will go out of business, who will blockchain disrupt and disintermediate, for us, when we had our conversations with our customers, it became very clear that we need to have co-existence. We need to have inter-operability. Not just inter-operability, between one form of one blockchain network and another. We cannot be in islands, we have to make them connect, we have to inter-operate. We created our Quartz Gateway solution precisely for that, and also for us to be able to inter-operate with other networks, messaging networks, data networks, so that you are in an interconnected world and not in an island, because when you are in an island, you don’t get the critical mass. And even today, I am concerned that in a lot of the first set of, you could say, co-existent DLT [Distributed Ledger Technology]-based projects which are out there, there’s not enough connectivity. They are stand-alone. They are islands. They coexist with other ones. So if we break this, and that is where the Quartz Gateway comes in, if we connect these together and make the data move and reconcile across these networks, then you have something powerful that co-exists, and you can use next generation and older technology together and not have one or the other. So I think … I think it’s in some sense the only way. It is in some sense the only way in which we can, you know, you could say, leapfrog into the future, you know, not abandon one for the other, right? It’s, you know, it’s very difficult to abandon any system and transform it, in my view, Dominic. I think there’s too much resistance for that. And I think a complete migration is difficult. So co-existence with the level of inter-operability is clearly what we see as the way forward.
Question: The buy-side wants to be insulated from the complexity of investing in digital as well as traditional assets. How can TCS help its sell-side clients insulate their buy-side clients from the operational complexity of trading in both traditional and digital assets?
15:12 Dominic Hobson: Indeed, as you say, jumping from one technology paradigm to the next one is indeed very difficult. And you talked earlier about customers being focused on outcomes. I know that you understand the point I’m about to make, which is that when we talk to the buy-side, to asset managers and to institutional investors, who are, after all, the most important institutions in helping digital assets actually take off, the one thing they don’t want to get involved with is the operational complexity of investing in traditional assets, but also investing in digital assets. At the moment, from their point of view, digital assets exist in one silo and traditional assets exist in another silo. They’re kind of looking to their custodian banks and fund administrators, and, to a lesser extent, by extension to central securities depositories [CSDs], the type of institutions that are your clients, to insulate them from that complexity. And if they’re looking for their clients to, or their suppliers, to insulate them from that complexity, those suppliers are your customers. How’s it affecting the way TCS goes about developing its technology? You need to help those suppliers insulate their own clients from the complexity of dealing in digital and traditional assets at the same time.
16:31 Vivek Ramgopal: Yes, there are two parts to that, Dominic. One is clearly they do not want to deal with the complexity. Second is they do not want multiplicity of systems, which is where the challenge starts coming in. They want to see them together as much as possible. So for us, while we create co-existence between solutions, we also need to ensure that the level of integration is seamless, such that their end-clients are not having to deal with two different systems. So if somebody is trading, they shouldn’t have to worry about that trade going to multiple systems. They shouldn’t have to worry about that asset being held in multiple systems. The view that they get should always be seamless. And as long as they get that view, they are going to invest in all kinds of asset classes. So if we start from that, with the end in mind, then it becomes much more elegant for us to stitch together a solution in which, `Okay, this is what the end-customer needs.’ So even if it is going to hit two or four different systems, with the custodian, with the broker, and how is it that it is done in a way in which the end-user does not feel these hops? Now, if we do that, then I think we do not have a big challenge in terms of managing the co-existence. And that is what we are trying to create. Make people trade in multiple asset classes, hold multiple asset classes and take away … and kind of, like, it is our responsibility to simplify that complexity at the back-end and make it possible for them to just look at these as different line items in a portfolio.
18:18 Dominic Hobson: Let me zoom in one of those TCS client groups in particular, and I’m referring here to central securities depositories [CSDs] because TCS has had, for a very long time now, a very large market share of the software used by central securities depositories. As you talk to them – and I, of course, have had conversations with them myself- but how excited do you think CSDs are about the opportunities for them if digital asset markets take off? Are they enthusiastic or are they waiting and seeing or are they actually negative about the possibilities?
18:53 Vivek Ramgopal: They are enthusiastically waiting and watching. You know, see, it has taken a lifetime to have this portfolio of customers that we have, right? These are, you could say, and the reason why I am putting it that way, is because a lot of these programmes, they are once-in-a-generation, and the CSD industry, as a business is used to doing programmes which are once-in-a-generation. They do not change systems every five years or ten years or 15 years. I think core systems tend to have a much longer life than what they initially start off with in the business case. Typically, when they put a business case for a core system, we are talking five years, seven years. That’s not how long, finally, those systems run. They run for much more than a decade. So, given that, I think there is excitement about digital assets, there is also a certain amount of, you could say, lack of clarity about them having multiple systems which will run in parallel. So a lot of them have different systems for different asset classes. So if you tell them that the digital asset is another asset class, that tokenised securities are completely different asset class, then the paradigm is that, ‘Okay, I will have another system for it and then these will run together. I will run another depository system for tokenised securities.’ But that is not necessarily the future, right? Our own software, we always have multi-asset class solutions. So you don’t run different systems for different asset classes. So when you put these together, I think there are three, four points that a lot of these people have to consider, and I think they are considering it. One is that are they going to have a new transformation programme? Are they going to replace their core system? Or are they going to do digital assets in a new system, have it running in parallel to the core system? I think a lot of them are thinking that they will have to, you know, co-exist in the solutions when they do that. There is also the big question. A number of CSDs are running older systems, which, you know, could be towards the end of their lifespan. Now what do they do? Do they now go forward and completely transform that and also look at digital assets? Is it one system? Is it two systems? That, again, is a problem that they need to solve, Dominic, in my view. I think, you know, we have solutions that cut across all of these, you could say conventional asset classes, digital assets. How do you service both of them? I think a lot of them need to solve the problem in their boardrooms, in their strategy meetings. Do they want to run one, two, three systems? Do they want to have digital assets running in a parallel track while they look at modernisation of their existing, you know, you could say, end-of-life systems and give that higher priority? This is what, in my view, is confusing them a little bit. Which do they give priority to? Because one is fundamental to their business and the other, in the form of digital assets, drives growth. So do they bring this together or do they not bring it? And as they look around the world for different examples, they decide one way or the other.
22:23 Dominic Hobson: As you’ve just been explaining, there is of course a role for CSDs [Central Securities Depositories] in helping digital asset markets actually to happen. But on the other hand, they have quite a good excuse for waiting and seeing, which is that there isn’t that much happening. And some of them will know this from their direct experience with this seemingly endless series of Proofs of Concept [PoCs] and Pilot Tests and various collaborative ventures. I was looking at our own data sets here at Future of Finance and looking at the inordinate number of these Pilot Tests and Proofs of Concept which have gone on over the last seven years or so. My question is, we seem to have proved in multiple different ways that this technology works across equities, across bonds, across funds, even in derivatives and collateral management, goodness knows what else.
But why have so few of these initiatives actually got into production? What do you think explains that?
23:22 Vivek Ramgopal: See, I think they have all proven what they wanted to understand in terms of how much scale they can do, what can you do, how do you have an end-to-end life cycle, how can it run in parallel to existing systems? It is proven. For the CSDs [Central Securities Depositories], unlike many others who are working with blockchain, I think the eco-system problem is also not there. I think a lot of others have an eco-system problem because, you know, the DLT [Distributed Ledger Technology] works best in an eco-system. How do you create that eco-system? When it comes to CSDs, they are natural providers of eco-systems. They run that. So that problem is also not there. So that is also out of the way. In that sense, they know what technology can do, they have an eco-system, they are ready. So these challenges are all out of the way. I think the big problem that they have to tackle is how they go from innovation to transformation. That is how I would describe that. I think it is innovation versus transformation. Innovation, Proof of Concepts [PoCs], pilots, these smaller projects, I think they have all been able to find ways to do them, get the results, the proof points, be able to tell what you can and cannot do with the technology. Transformation is a completely different ballgame in which one, you know, you need to, you could say, replace parts of your existing system at least and transform it to go to the next generation. Secondly, you need to create greenfield markets in which you can apply the technology and use the technology to drive growth. So I think it is in the transformation phase and in the transformation paradigm that there is a certain level of reluctance, Dominic, to be able to, you could say, move forward. I would not say take the plunge, because in this case they are not taking something that is difficult. It is that … See, this is also one of the reasons why a lot of, you could say, systems run way beyond their lifespan. I would not use the word legacy loosely because, you know, who is to define what is legacy? But, you know, there is a challenge of managing knowledge in older systems. So those problems are also there only because these transformation programmes face reluctance and resistance from the markets. So I would not say that this is a financial market infrastructure or a CSD or an exchange problem. I think these are market problems because at the end of the day the resistance comes from the entire market. It does not come from the singular centralised institution. Regulators want to do the transformation. They want modernisation. They want digital assets, they want tokenised assets. That’s very clear now. Most regulators are pushing for them. So what is holding back, holding the nations back or markets back, is the larger, you could say, integrated market resistance or lack of market momentum drive to execute these projects. So when we face an innovation versus transformation question, there’s so much more appetite for innovations, for smaller projects, and there is not at all the same level of appetite for heavy lifting transformation programmes, greenfield projects which need to be taken on board. So I think if that part can be solved, which is probably what they are also looking at providers like us to solve. You spoke about complexity versus simplicity earlier. I think if they feel that it is less complex, more predictable, [and that] programmes will run a lot more to schedule and budgets, then I think more and more of these transformation projects will be taken up.
27:10 Dominic Hobson: I hear what you’re saying about how difficult it is for a segment of the market to have or make a transition to digital assets. What worries me about that observation is, of course, that if everybody has to digitise, perhaps nobody will. You brought up the question of exchanges there, and I just wonder if when you talk to exchanges, and maybe when you talk also to central counterparty clearing houses [CCPs], these other vital parts of the securities market infrastructure, whether you get a different perspective from them to the one that you hear from central securities depositories [CSDs] or custodian banks or asset managers or even regulators. Because exchanges and CCPs have the same issue: do we need to transition off our existing platforms? If so, when should we do it? What’s the right time? How much will it cost? How long will it last? Do they have a different perspective to, say, CSDs?
28:08 Vivek Ramgopal: I will put exchanges in two buckets. One are the very well established exchanges, and then there are the smaller ones. You could say they are the challengers. The difference when it comes to exchanges is that they compete a lot more than the CSDs. They have a natural need to compete for market share. So I think they are always looking to see how to compete a lot more than a CSD, naturally, because CSDs are predominantly our national infrastructures who have a quasi-monopoly. But I would not say that they are excited about tokenised securities as much as I would have expected. I would have thought that exchanges would move faster. I think they are not very clear about whether this will drive new growth. Clearly it will. They are also not sure if tokenisation will replace electronic securities. So I think, you know, that is where we are having a little bit of, you know, we are in a, you could say, transitory period right now, in terms of solving that problem. And in order for people to succeed with something like this, it is necessary for us to look at three, four year programmes and not eight, ten year programmes, Dominic – that’s the other thing. I think today we need to create business cases that go to fruition in about three to four years – should be able to show the numbers in three years, four years. So you cannot run seven, eight year projects, ten year projects. I think a lot of the earlier generation projects ran for much more than five years. So that also needs to change. So that’s also something that probably disturbs these people. But I would not say that exchanges are more excited, but they feel the need to compete and to create new products more than other, you could say, players in the infrastructure space.
30:09 Dominic Hobson: Let’s move away from digital assets now and talk a bit more about your established businesses. And it’s … from everything we’ve said to each other so far, we’re ignoring quite a large part of what you do. That I in BFSI, banking, financial services and insurance. I know that TCS has a very successful outsourcing business in the life and pensions area called Diligenta. I’ve experienced its services myself as a product consumer. Does it ever cross your … Tell us a bit about that … But does it always, ever cross the mind of you and your colleagues to develop a similar outsourcing business in the capital markets with all those firms you’re currently just selling software to?
30:51 Vivek Ramgopal: Yes, yes. Big yes. You know, as an end-customer, I think you know that when it comes to the UK, you know, we have expanded Diligenta to a level where we have scale. You know, we, if you look at what we do across Diligenta and Nest [a workplace pension scheme set up by the UK government], I think we service pretty much 40 plus percent of the UK citizens. So we’ve really established and created that skill. That has taken time to do, but we have a lot of learning as to what works and how to make it work in another segment of the financial services industry. So I think we have the good lessons from Diligenta to be able to do more, including being able to operate like I said … That’s the difference when it comes to a platform. Diligenta is a platform where we provide a complete service and we are responsible for the outcome. In a sense, we are regulated. So it’s a very different type of business to run, and we will definitely look to do that in capital markets. We need the right opportunity. I think we would like to start with a different level of scale than what we’ve done with Diligenta because it’s taken more than ten years to build. I would not think that the financial market infrastructures are the starting point. I would think that other segments of the capital markets value chain are so much more, you could say, ready to lend themselves to a utility type model. So we definitely want to create those utilities, state of the art modern utilities which are based on a SaaS [Software as a Service] paradigm. We do have utilities from earlier and you know, utilities are not new in this business. But I think we will create a SaaS plus paradigm in which we will create more efficient, you could say, utilities than what there are today. Our insurance business is the largest of the BFSI that we do, Dominic, by the way. `I’ is towards the end of the BFSI definition but for us the insurance business is by far the largest business that we do and Diligenta is a significant contributor to that.
33:12 Dominic Hobson: I can see why you would want to expand that outsourcing business. I think I’d be right to say it is a more solid business with higher quality earnings than selling software. It’s obviously more difficult because it’s regulated and so on. But I can see why you want to grow that. But it does mean that you’re in this position where you’re selling software on the one hand and you’re providing outsourced services on the other. How difficult is it to keep those two very different businesses in proper balance?
33:43 Vivek Ramgopal: There are, I would say, three different businesses, Dominic. Not even two, right? Because you know, as TCS, outsourcing is our largest business, right? When it comes to Diligenta, what is outsourced is not IT [Information Technology]. What is outsourced is the complete business, right? So there are three parts to it. One is the software business, where we create software product solutions and licence them. The other is the platform business in which we take responsibility for a complete outsource service. Then the third of course is IT outsourcing. So these are different businesses. What we do in TCS is that we house them and we kind of grow them, nurture them, structure them very differently. So these are completely different business units, business lines in TCSs, they are treated differently, they are measured differently in terms of our results and our KPIs [Key Performance Indicators]. Which means that we are like small companies within a company. So that gives us the flexibility within the organisation to be able to service customers who come to us for different things. Sometimes the same customer is doing different things with us, is doing work with us in completely different silos. So they will take, you could say, outsourced. They will give us outsourced projects. They will take some of our people to do programming, testing work on Cloud deployment. But on the other hand, another part of their business will be outsourcing completely to Diligenta, or they will be, you know, buying a licensed product from us. So that is how we manage it. A lot of the work that I do, and my team does, we call this … These are strategic business units where the model is different from, you could say, large IT outsourcing and is predicated on product licences, product businesses and platform outsourcing and platform-based subscription services. They are complete silos. And just as a last point on that, Dominic, sorry to interrupt. We also need to structure them as silos and take care of them very differently because we do not want to have … We have very clear, structured silos and walls between where we create our solutions and products and where somebody is servicing in a third-party solution.
36:23 Dominic Hobson: I was going to say there must be a challenge in maintaining the right balance between the big picture, wanting to transform things, and the micro picture dealing with customer pain points on a day-to-day basis. And I know that TCS has developed this business helping custodian banks manage corporate actions. Now, this is one of the oldest problems in securities services. I’ve been involved in this industry for more than 30 years, and I think corporate actions were a problem which needed solving back then. They certainly need solving still now, and all sorts of efforts been made over the years to do that. But you are directly engaged in that. So tell us a bit about how you’re approaching it, and secondly, tell us what you think the components of a final effective solution to the corporate actions pain point would actually look like. So what are you doing now and what’s the eventual solution look like?
37:19 Vivek Ramgopal: See, the problem that we feel that has happened in corporate actions is that … I would not call it 80:20 because that is a little bit cliched, but the difficult elements of corporate actions are usually less than 5 per cent or even less in some markets. In some markets it’s less than 1 per cent. So the complexity in solving that takes away a lot of the benefits of the remaining 90 or 95 per cent. So I think we need to go more and more towards a level of extreme automation in order to be able to do this. What I mean by extreme automation is that we need systems where, when there is a problem, we are in a position to identify, isolate and correct the problem through software. That level of intelligence is needed. Today we do not have that. What happens whenever there is a problem is that the level of manual intervention is very high because it is very high, the correction of the problem or the rollback and the reprocessing does not happen within a reasonable period of time. And hence this whole, you know, inefficiency. And you could say, managing liabilities, all those aspects come. So I think software should get more intelligent. I think the next wave for us will be to make the software more intelligent so that you are in a position to do these corrections. I will not say real-time, but in much more compressed time, so that the contagion of the error is a lot less than what it is today, which is why liabilities and such aspects come. The other thing that we are doing also is in terms of, you could say, information distribution, corporate announcements. How do we use technology, including DLT [Distributed Ledger Technology], to be able to disseminate information accurately and disseminate it once? Because today the whole process of scrubbing and having, you know, a multiplicity of information and working with information which is not yet 100 percent. So these are, you know, you could say, that is, these are one of the biggest sources of the problem. So if we eliminate that, and eliminate that problem at its source, which is the data, and only publish it once, ideally on a DLT, then again, we are getting into a situation where one big part of the problem is solved. So if you have DLT at the source and if you use a level of, you know, you could say extreme automation and AI [Artificial Intelligence] at the other end of the processing, including when there is a problem, then I think we are getting towards what I would call as the next generation of corporate action systems.
40:12 Dominic Hobson: I’m interested you brought up both blockchain and AI [Artificial Intelligence] in the context of corporate actions, and you see a role for both those technologies in helping solve that longstanding problem. My final question for you is actually on exactly that. I sometimes think we spend so much time getting excited about blockchain possibilities, we tend to ignore this other flavour of the month, which is artificial intelligence and machine learning [ML]. Have you identified clear use-cases? You just mentioned one, I guess, in the case of corporate actions, but have you identified other use cases for AI and machine learning in the banking and capital markets sector?
40:54 Vivek Ramgopal: AI is definitely the flavour of the year, Dominic, if not the month. I think a lot of the innovation, you could say, focus and innovation budgets are going to be for AI in 2024, maybe even 2025. And I think in AI we are clearly separating what we look at as AI in our solutions, between predictive AI and generative AI. When it comes to predictive AI, we already have it in a lot of our solutions, we use predictive AI for areas like fraud detection. We use predictive AI in capital market surveillance. So predictive AI, just in the financial industry, is already there, and AI and ML algorithms are being used by us. Not for many years – I would say the last two to three years. Why the last two to three years? Because the maturity of predictive AI and its AI/ ML usage and the ability to deploy it at scale has improved in these last five years, much more than what it was otherwise. AI has been there for 30, 40 years. It’s not new. Most of us have studied that in college. It’s been that old. So that’s one side. So then the second is, how do we use generative AI [Gen AI]? I think initially we will be using VR [Virtual Reality], you know, coming out, and you will see that soon. You will see it so much more in areas related to, you could say, training. `Assist’ is the mode where you could say, working along with the user and assisting them to be more efficient and less error-prone and faster. That will be an area. Then the other area that we are looking at is generation of reports, where I think today it is so much more of a laborious process to define. And those reports tend to be, finally, the output that you get from the system. And if you get more custom reports which are intelligent and generated on the fly through Gen AI, I think that will be hugely beneficial. So these are some areas that we are dabbling with. You will see us come out with that very soon. DLT [Distributed Ledger Technology] plus AI? Absolutely. I think there is a very important combination there. Why? Because there is so much of data that over a period of time will be there on DLT, that data will be there once, and that will be the truth. So when you have one source for truth and it is there on DLT, then the ability for us to run AI on top of that, AI engines, which will actually call out and create information from that data, I think it’s going to be incredibly powerful. So that is where I think DLT plus AI will come in. The first [occasion] that I spent time on the concept of DLT plus AI was in 2019, Dominic. And of course, that was pre-ChatGPT, pre- the craze for GenAI. But I think we have done some spade work on it. We are not going to rush into solutions for the sake of doing that. We have to handle the fit-for-purpose of AI very carefully, because AI also has its own, you could say, cost of ownership. So I think it needs to deliver on return on investment. So we will be fit for purpose in our use. And also I think we have some clear ideas on where the combination of technologies, predictive AI, generative AI and DLT can come together in intersections to be able to deliver the most compelling money.
44:32 Dominic Hobson: The fact you’ve been thinking about …
44:34 Vivek Ramgopal: 2024, not 2025 – this year, not too much into the future. Sorry to interrupt.
44:37 Dominic Hobson: Okay, well, I was going to say the fact that you’ve been thinking about how to combine blockchain and artificial intelligence for five years and it’s about time that it … Well, you’re now in a position where you would want to see some return on investment. It is a great place to stop because it’s an optimistic note. So Vivek, thank you very much for taking the time to talk to the members of Future of Finance and share your wisdom and your knowledge and your experience with them. Thank you very much.
45:05 Vivek Ramgopal: My pleasure. My pleasure. Dominic, thank you. Thank you for this opportunity.
