Custody Services Market Definition
The custody services market consists of sales of custody services by entities (organizations, sole traders and partnerships) that provide custody services or safekeeping services to clients.
The companies in this industry typically settle trades, invest cash balances as directed, collect income, process corporate actions, price securities positions, and provide recordkeeping and reporting services.
Companies in this industry are responsible for consolidation, processing, and monetization of large volumes of clients’ data. The companies in this industry hold clients’ property on their behalf, and are responsible for the safety of those financial products. The client remains the beneficial owner of the financial products, but the custody service providers hold the financial products on behalf of the clients.
Custody Services Market Size
The global custody services market reached a value of nearly $30.7 billion in 2019, having increased at a compound annual growth rate (CAGR) of 5.8% since 2015.
Growth in the historic period resulted from increase in income and personal savings, economic growth, market liberalization, and digitization. Factors that negatively affected growth in the historic period were high competition, rising cyber risk, and stringent regulations.
Going forward, increase in crypto currencies is increasing demand for crypto-custody service; increasing wealth of high net worth individuals, aging population, and rising demand for alternative investments will drive the growth. Factors that could hinder the growth of the custody services market in the future include risk of loss through custodian error or poor performance, and impact of COVID-19.
Custody Services Market Drivers
The Key drivers of the custody services market include:
Increasing Wealth Of High Net Worth Individuals– The wealth of high net worth individuals is expected to increase, and this will contribute to the growth of the custody service market going forward. The rich are expected to get richer in the forecast period. The assets held by high net worth individuals (HNWI) are expected to increase from $63.5 trillion in 2016 to over $100 trillion by 2025. The wealth held by HNWIs of Asia Pacific alone is expected to reach $42 trillion by 2025. Growth of wealth is expected to increase demand for several financial management services including custody services. Going forward, growth in the wealth of high net worth individuals will accelerate the market growth for custody services.
Custody Services Market Restraints
The key restraints on the custody services market include:
Risk Of Loss Through Custodian Error Or Poor Performance – The custody service providers are responsible for the safekeeping of their clients assets, as well as the processing of transactions. Operational, credit and strategic risks are involved in the custody service market due to the high volume of transaction processed daily. Any fault by the custody service provider, exposes the customers to liquidity, price, credit, and foreign currency translation risk thus retracting the new clients in the custody service market and restricting the growth of the custody service market.
Custody Services Market Trends
Major trends influencing the custody services market include:
Implementation Of Blockchain Technology
Companies in the global custody services market are increasingly using block chain technology for better security and operational efficiency. Block chain is a technology which involves the implementation of a distributed database that is accessible to all the users over a network, where each user can add a new data record (block), with a timestamp that cannot be altered. The block chain technology maintains the authentication of data by restricting changes in the older data blocks while allowing the users to continue adding new data blocks, thus, providing high security and transparency to companies operating in the custody services market. As per the Pricewaterhousecoopers (PwC) report, by 2020, 77% of financial organizations including custody services plan to integrate block chain into their operations.
Investments In Distributed Ledger Technology
Custody service companies are increasingly investing in distributed ledger technology which helps in shorter settlement cycles and cost reduction. The distributed ledger technology is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality. Depending on their role, each participant in the value chain will have access to the relevant information on a real-time basis. Companies such as IBM, R3 and Ethereum offer blockchain linked distributed ledger technology to custody service companies to enable faster adoption of this technology.
Opportunities And Recommendations In The Custody Services Market
Opportunities – The top opportunities in the custody services market segmented by type will arise in the fixed income market segment, which will gain $1.92 billion of global annual sales by 2023. The custody services market size will gain the most in the USA at $1.2 billion.
Recommendations – To take advantage of these opportunities, The Business Research Company recommends the Custody Services manufacturing companies to investg in blockchain technology, restructuring to gain market share inorganically and remain competitive, investing in data management tools such as cloud computing to provide a seamless service, investing in cyber, and investing in robotic process automation (RPA) to increase efficiencies.
Custody Services Market Segmentation
The custody services market is segmented by type, and by geography.
By Type -
The custody services market can be segmented by type into
The fixed income market was the largest segment of the custody services market, accounting for $20.7 billion or 67.5% of the total in 2019, and this market is expected to be the fastest-growing segment going forward at a CAGR of 8.9%.
- a) Equity
- b) Fixed Income
- c) Alternative Assets and Others
By Geography- The custody services market is segmented into
North America was the largest region in the custody services market, accounting for 52.0% of the global market in 2019. It was followed by Western Europe, Asia Pacific and then the other regions. Going forward, the fastest growing regions in the custody services market will be Eastern Europe and Eastern Europe.
- o North America
- o Western Europe
- o Asia Pacific
- New Zealand
- Hong Kong
- South Korea
- o Eastern Europe
- Czech Republic
- o South America
- o Middle East
- Saudi Arabia
- o Africa
- South Africa
Custody Services Competitive Landscape
Major Competitors are:
Other Competitors Include:
- • State Street Corporation
- • Bank of New York Mellon Corporation
- • JPMorgan Chase & Co.
- • Northern Trust Corporation
- • BNP Paribas S.A.
- • Citigroup Inc.
- • Pictet Group
- • HSBC Holdings plc
- • Royal Bank of Canada
- • Deutsche Bank AG
- • General Mills, Inc
- • Industrial and Commercial Bank of China
- • Bank of China
- • Standard Chartered
- • Mitsubishi UFJ
- • Sumitomo Mitsui Banking Co
- • Mainstream Group Holdings Limited
- • Trust & Custody Services Bank, Ltd
- • Mizuho Bank, Ltd
- • Clearstream
- • Dolfin
- • Barclays
- • RBC Investor & Treasury Services (RBC I&TS)
- • CACEIS
- • Societe Generale Securities Services (SGSS)
- • Euroclear
- • UBS AG
- • Credit Suisse
- • Skandinaviska Enskilda Banken AB
- • Cecabank
- • Intesa Sanpaolo
- • Commerzbank
- • Sberbank of Russia
- • VBT Group
- • Infinitium
- • ING Bank Slaski S.A.
- • UniCredit Bank
- • Bank Handlowy w Warszawie S.A.
- • Gazprombank
- • Rosbank
- • MKB Bank Zrt
- • Brown Brothers Harriman
- • Wells Fargo
- • Bank of America Merrill Lynch (BofA Securities)
- • Schwab
- • BTG Pactual
- • Blackrock Inc- Brazil
- • Deposito Centralizado de Valores de Colombia Deceval S.A
- • Bolsa de Valores de Lima (BVL), AFP Integra S.A., Banco BICE
- • Riyad Capital
- • Aljazira Capital
- • KASB Capital
- • Muscat Capital
- • NOMW Capital
- • Arqaam Capital
- • Ubhar Capital Saoc
- • Standard Bank
- • Altree Custody Services
- • RMB (Rand Merchant Bank)
- • Zenith Nominees Limited
- • Stanbic IBTC
- • HC Securities & Investment
- • Ostoul Capital Group
- • NCBA Group
- • Absa Group Limited
- • National Bank of Egypt