There were the dark days and then some. When the bank was downgraded by credit rating agencies seven years ago, counterparty risk became an issue. In the custody business, it is the number one concern when it comes to the safekeep of assets by the biggest owners/managers. From a period of uncertainty and underperformance, Anand Rengarajan, head of sales, trust and securities services, Deutsche Bank, Asia Pacific, Middle East & Africa, stayed the course. As the business turned around, confidence was restored, and among key clients, trust was rebuilt, restoring the bank's standing as a provider and an alternative for those looking to diversify.

Rengarajan is the Custodian Banker of the Year at the Asset Servicing Leadership Awards 2025.

In this interview with The Asset, he talks about his vision of how the future of asset servicing is evolving.

The Asset: What do you think the asset servicing model in Asia-Pacific will look like in 2030?

Anand Rengarajan: We don't have a crystal ball, but if I do – and it's not too far off, it's only five years from now – I’ll see broadly two areas of trends, which will define the model.

One, Asia, in the past few decades, has been viewed as more of an investment destination for the global investor fraternity, as we tend to see eastbound investments. We started to see that change more post-pandemic. If you look at the way the wealth is growing in this region, and juxtapose that with various researches, which talk about how the centre of gravity, from a global investment standpoint, is pivoting more towards Asia, I see Asia emerging more as a source of investment, rather than just an investment destination.

And that is what we're already starting to see. These investments from various markets, such India, China, Indonesia, and Thailand, you will start to see that going to intra-Asia and westbound. I think that will be more and more prominent in the years to come. Definitely, by 2030, I think that will be much more significant than it is today.

In summary, east-to-westbound is going to be more prominent, and that, therefore, will push a re-look at the asset servicing model.

The second big trend that will define how this asset servicing model will look like – there are two aspects to it, and both are technology-related.

I think the point I've made now quite often is about how more and more retail investors are making smaller-ticket-size investments using apps from their mobile phones. This is going to be prominent both for the banks and platform providers.

This can be linked with tokenization of real assets, which could become more and more prominent. We have started to see a semblance of it. That could be in five years much more permanent. This will lead to technologically enabled service providers being the ones who are more capable of servicing this particular category of investors.

I think technology-enabled service providers that cater to these highly demanding investors will be critical for success in the years to come, definitely by 2030.

These are the two trends that will redefine the asset servicing model in 2030. While there are many other trends, these would be my top two.

What are the biggest risks and opportunities for global custodians in the region over the next five years?

In the past, the investments were always from the west to the east, and that was the focus largely from a global custodian standpoint. But the reversal is the opportunity, especially if there's going to be more and more of the reversal, where there are going to be more east-to-westbound flows. I think that is where the opportunity is for them.

But the risk is really not the same for all of the markets. And therefore, for somebody to excel in a region like Asia, you need to have a provider who's very strong regionally, who’s network is very strong in the region.

I wouldn't call it a risk here, because the nature of what a global custodian does, and the nature of what domestic regional custodians do are very complementary. And if they are able to partner with the right providers in this region, and there's a very complementary nature of partnership, I think that also could be converted into an opportunity.

This is precisely what we are working towards, the complementarity and partnership with them. I think that's where the opportunity is. And in addition to that, if they want to capture the intra-Asian flows as well, that is where the strength that a regional custodian has can be very important.

How are the increasing east-to-west investment flows changing the way you service your clients? For example, some custody mandates now have overlapping objectives, functions, and investment models. Can you cite an example of how that is also changing the way you, as an asset service provider, respond to these changes?

That's a very good question. As more and more Asia-based investment houses are investing in the West, they need somebody who's locally present, who has local time zone-related service capabilities. At the same time, this same asset service provider has to be very strong in the country where the investment will be going, and that could be the US, Brazil, the Middle East, or Europe. They also need real-time information about these markets during their ( Asian ) own business hours.

As an example, in any of the Asean markets, the clients need capabilities of the provider to be able to integrate these two quite seamlessly. In the past, these capabilities may have been there, but because the investment flow was so tiny, it was not very important that they had final cut-off services, or that they had real-time information, for example.

But now, with investment flows increasing rapidly, they need the information, almost instantaneously. Now, this is imperative with the size and scale of the investments growing. When they do their west-bound investments, they now demand the same capabilities that the asset service providers extend to US investors who are making investments in Asia. That demand is rising. For example, they also want a follow-the-sun approach when making investments in multiple parts of the world.

In the past, we did not necessarily cater to that except in selective cases. Now, I think every client is demanding the follow-the-sun approach for servicing, even for other things like FX services. That is changing, too.

And this links to the point about how these investment houses are now servicing a much younger population in the region. For example, as far as retail investors are concerned, this is critical, because this generation wants information at their fingertips; they don't like any lag in information. That means the asset service providers have to change the way they’ve been servicing.

The core of what has to be serviced hasn’t changed. But the way they need to service that has to change. It needs to be much quicker. That is where technology will play a big role, because you need to invest and make sure that technology helps in the way you can build efficiency and scalability and to address the really agile requirements of this servicing model.

One other trend is that if you're an asset manager with less than a billion dollars, for example, some of the bigger asset service providers don't have economies of scale to service you. But someone still has to service these smaller asset managers? How are the asset service providers responding to that?

I think it's a bit of a Catch-22 situation because the margin compression on the asset manager side of the business continues to be highly demanding. They want more for less because there is pressure on their side. They have very, very fine margins.

At the same time, there are custodians who want to increase their threshold, saying that they will not do it below a particular threshold.

I think asset service providers have to find the right balance, and that's where you determine the terms of how you want to operate. I think the other factor is that this is an economies-of-scale business, and I think our strategy, especially in the Asian markets where we are, is heavily focusing on the domestic client and therefore the economies-of-scale advantage that goes with servicing the needs of the client.

Various service providers cater to different needs and work with different thresholds. So, the industry essentially caters to all of them, in a way. But they all want the same high-class level of services, etc. They probably may not get it because there's a cost to providing that high-level but high-cost services. So, you then pick and choose, depending on what you're comfortable with.

Our approach has been to try and be the best you can in what you do, and at a price point that is mostly acceptable to both ourselves and the clients, for which you need to have real economies of scale. Which is why I keep making the point that the bar gets raised every few years, when there will be a clamor from some people who say they are not getting the right kind of economies of scale, which is what actually leads to more consolidation in this industry.

But compared to what I have expected, we have not seen as much consolidation in this part of the world.  But if you look at places like Europe where consolidation has happened multiple times, providers are consolidating simply because they do not have economies of scale to justify staying in the business. And I think that is going to continue for the next five years.

On consolidation and partnership, we’ve also seen a trend where some custodians are partnering with other custodians to service a special mandate, for example. Or partnering with fintech firms who may have the technology they need but do not necessarily have the resources to invest in. How do you see that working out?

If you really want to be successful, partnership is key.  If you are a very strong player in the region, like we are, in Europe and Asia, you want to partner with a global custodian, because we are very clearly not a global custodian. So, we partner with them because we are very complementary in nature.

Having said that, the partnership doesn't stop there, which is a very important point. For example, in some markets like Malaysia, we have partnered with another bank to service some of the local needs, which they are able to do better.  And it makes sense for us to do that.

Those are rare instances, but still, the key is to have a partnership, both at the global level, at the country level, where it is required, so that you are able to address the needs of the clients holistically.

And second is partnership with tech providers. And that is important because there are cases where a number of custodians use a common service provider. For example, if you're looking at onboarding, which is a very important process in the chain, you want to do that without compromising on the principles and why these are required. You want to have it much more efficient than it is today.

So, if we are having a partnership with one or two providers who are largely being used by other clients and global custodians, the fact that they're on the same platform allows for better integration between the two of us, which enhances the client onboarding experience. We tend to partner with providers who are commonly being used among the industry players, so that the whole industry sees efficiency in the way we do things.

There are multiple things that we are trying to do and I give onboarding as an example because that's a very relevant one. But, for example, in client servicing, people are using a particular application which they will use internally as their dashboard for client servicing. If we are able to integrate with that platform provider, then client servicing becomes even more efficient. And there are a few providers who are in that space.

Across the whole gamut of where there is interaction between us and our intermediary clients, and our direct clients, I think the use of technology by providers who provide that common link between the two is important.

And that is why this kind of technology partnership is very critical to success. If you don't do either of these, it will show up from an impact standpoint, in terms of how you're able to grow in this space. Partnership is going to be critical for success in the future.

The antithesis of partnership is competition. While you're partnering with the same provider, for example, you're still competitors. So, how do you remain competitive if you're basically using the same partner for the same thing?

Obviously, in any partnership, if you don't see yourself as complementary, and you see yourself as a direct competitor, I think that partnership won't work. How you choose your partners should be such that the complementary nature is much higher, and the conflicting nature is very minor, if at all, it should be non-existent. That is the way we have chosen our partners.

If you look at all of our partners who also have a custody business, and there are only a few, we don't compete at all. And our technology partners, they're not competitors to us.

If you had to bet on one APAC market becoming a regional asset servicing hub, which would it be and why?

It's a very tough question to answer. I think there are probably two that exist today.

Hong Kong will continue to be a big hub to service the China and Greater China region. That will continue to be one simply because China is big and I think Hong Kong will continue to be a conduit to both northbound and southbound.

And second would be, if I have to pick one hub for the rest of the Asian region, Singapore. Singapore is currently positioning itself as that, and I think that will continue. So, if I had to bet on two potential hubs, not one, it's probably going to be Singapore and Hong Kong.

Are these two markets complementary or are they competing with each other?

To some extent, yes, but largely they will be complementary. If people are focusing on this part of the region, they are probably looking at Singapore.

India is obviously trying to pivot to see if we can bring in direct access to the whole market. But if you look at what could be a big regional asset servicing hub, then that is different from going to India directly. Therefore, I would pick Singapore and Hong Kong. And I think they are very largely complementary.

One other thing that has come out recently, which is also impacting especially the US asset service providers, is the geopolitical scenario. There are some clients who don't want to use American service providers, and probably vice versa. Does that impact the way asset service providers service their clients, or do you remain agnostic to all these geopolitical situations in the way you do business and just try to provide the best service to your clients?

This is not a new topic. The risk has been going on for a while, but there were other reasons related to risk and resiliency that come with a single-provider business model. So clearly, those who have a single-provider model, we can clearly see the trends. Now, I'm just making a very generic statement, but it is applicable to all markets.

Those who have got a single-provider model are moving or have already moved to a dual-provider model. And those who have a dual-provider model with concentration risk, with the few providers based on a particular region or otherwise, also are looking at diversifying that, by picking one provider from Europe, one provider from Asia, one provider from US, and things like that, so that you're not also concentrating with a particular region.

This model is evolving, and they are trying to make sure that in a dual provider model, where you've got risk and resiliency inherently in place, you're still equally efficient, and this is not leading to inefficiencies and/or increased cost. The challenge is to make this model work from a resiliency standpoint, but at the same time not compromising on efficiencies and cost.

To some extent, it is inevitable that when you look at this, you will not be able to do it at the same cost. But I think you should still benefit from the use case from a risk standpoint. I think that's what people are looking at.

And while I can't quote names, there are many examples of how clients are looking at their current setup and the resiliency models. In the past, they were only talking about it, but now they are actually starting to act on it, and this, I think, will continue. But eventually it will come to an equilibrium of sorts, once they've addressed the resiliency model.

But this trend of focusing on risk and resiliency did not start just now but it is getting a little bit accelerated now. But it started three or four years ago. We have all been talking about how it is important to address it from a risk standpoint, and it all started from some places like Europe, where somebody had to exit, and then Russia, and all the stuff.

In your career as an asset service provider, can you cite one or two instances that you consider a learning experience that have stuck with you all these years and that you use as a sort of benchmark or a guiding principle whenever you're faced with new challenges as you go ahead?

I'm glad you asked it in a way that presupposes that I'm still learning, which is the truth. The learning never stops, and that's why I'm very impressed with the way you ask the question, which is, what is an example of what keeps you learning right? I think it goes back to what I learned when I was in the weeds as the India head, doing two things in parallel. One, and that was the time when we went through a massive regulatory overhaul, that's when the new FDI was constituted in India. So, one was the regulatory angle, where there was a complete overhaul of the regulations. At the time, we were fortunate that we were so well connected with our clients. We knew exactly what the clients did and what their requirements were, both domestic and cross-border or international clients. In this particular instance, the change was from a cross-border perspective, but there were also some changes on the domestic side.

So, I just felt that if you really wanted to play an important role in this industry and help shape the industry better, you need to understand the client framework really, really well, and their needs and demands in advance really well. So a deep understanding of the client was required, which is where I invested a lot of time.

And then we also made sure, and I personally, since this is a personal question to me, and I just felt that I cannot just put the clients’ views in front of the regulators and industry.

I also needed to know the principles on which the regulations are based, how the other intermediaries are playing. So, I spent and invested a lot of time in understanding the regulation, but not just from a black and white perspective, but understanding the real principles behind it. Because in order to find solutions, you need to understand that.

I think that the investment in learning how clients look at solutions, and how regulators look at that is always helpful, which is almost like going to first principles. So, whenever I am hit with a problem, I said, you start thinking on a first-principle basis. What are the underlying principles on which this needs to be implemented? Then you approach the systems,  having the mindset to find a solution. Always, you'll find a solution where both sides are happy, or if there are intermediaries in between and deposit creation, all of them have to be happy.

And this is very evident when a T+1 or a T+0 move is happening, we have to have history coming together, and you all play your respective role. And then unless you see the other side, you and your view, the regulator’s view, and all of that in tandem, you won't be able to find a common zone.

So, my view is, think of all aspects, go into the basics, look at the principles, and then the solution will automatically manifest itself.