Custody at a turning point: Six technology priorities for the next five years

Introduction

Evolving market infrastructures, regulatory change, and rising client and market expectations are reshaping custody and post-trade services. The push for faster settlement cycles, lower risk, and real-time digital experiences is accelerating demand for innovation in data, artificial intelligence (AI), and digital technologies. At the same time, the wider securities services landscape is grappling with four intertwined challenges:

• harmonizing an increasingly complex regulatory environment;
• improving operational efficiency as profit margins shrink;
• managing the cost and risk of disparate legacy IT systems; and
• advancing digital transformation across assets and processes.

Custodians now need technology platforms that support a broader range of instruments, including digital currencies and tokenized assets, while meeting tighter settlement timelines such as T+1, new disclosure and reporting rules, and cross‑jurisdictional tax and accounting requirements. These platforms must deliver transparency and real‑time oversight while integrating seamlessly with legacy infrastructures and fragmented databases to reduce risk and enable consistent, compliant processing.

Technology service providers are investing in modular architecture, cloud, application programming interfaces (APIs), automation, and advanced data and AI capabilities. However, they still face significant hurdles: harmonizing data and workflows across markets, modernizing or replacing legacy systems without disrupting business as usual, and scaling innovations such as distributed ledger technology (DLT)-based custody while maintaining regulatory compliance.

Against this backdrop, we examined how technology solutions are evolving across the full custody value chain, from client access and reporting to settlement, asset servicing, safekeeping, digital assets, connectivity, and treasury. This overview shows where custody technology stands today, identifies the main barriers to modernization and regulatory harmonization, and highlights where innovation is already changing the pre-trade, trade, and post-trade landscape.

Our assessment of the custody technology provider landscape revealed six key insights:

1. T+1 is a structural catalyst, not a compliance exercise

T+1 settlement in Europe is accelerating the transformation of custody operating models. It requires greater automation, end-to-end straight-through processing (STP), real-time exception management, intraday liquidity visibility, and ISO 20022 readiness. Although technology providers broadly offer the capabilities needed for T+1, institutions still face a more fundamental challenge: operational readiness and effective adoption. Firms with streamlined processes, strong data governance, and highly automated operating models are better positioned. Those that rely on fragmented workflows and manual intervention face greater operational risk. Ultimately, T+1 is shifting the custodian’s role from post-trade remediation to proactive pre-settlement control and operational excellence.

2. Custodians must modernize asset servicing end to end

Corporate actions remain one of the highest-risk and hardest-to-modernize areas in custody. Most platforms support structured lifecycles, but the level of automation varies widely, particularly for complex voluntary and elective events. Deep links between corporate actions and settlement, cash, tax, accounting, and reporting constrain modernization. Custodians therefore need a coordinated, end-to-end transformation rather than a standalone functional upgrade. Meanwhile, client expectations for real-time notifications, self-service elections, and transparent entitlement tracking continue to widen the gap between current platforms and market needs.

3. Legacy architecture remains the single biggest constraint

Monolithic, batch-driven legacy systems remain the primary obstacle to custody modernization. Institutions must address technical challenges such as API integration, real-time position management, rules-based settlement routing, and coexistence with SWIFT and ISO 20022 messaging. They must also redesign workflows, processes, and governance alongside the technology. API maturity varies widely across the market, and the gap between ambition and operational reality has direct implications for custodians selecting technology partners.

4. AI deployment in custody is a data problem first

The industry broadly recognizes AI’s potential to transform custody, but firms have deployed it only sparingly in core custody workflows. The barriers are foundational: fragmented data, inconsistent data models, batch-based architectures, and governance constraints. Today, firms use AI mainly in adjacent areas such as client analytics, fraud detection, and onboarding automation. AI governance will become the critical differentiator. Providers that embed explainability and auditability into high-control custody environments will be best positioned to scale AI safely and in compliance with regulatory expectations.

5. Tokenized traditional assets will likely accelerate digital asset adoption

Digital asset custody is emerging as a key market capability. Most providers support it through integrations with specialized custodians rather than native platform functionality. This approach enables faster market access, but providers still face significant challenges related to real-time processing, wallet infrastructure, and integration with legacy custody systems. Regulatory clarity is improving, particularly under the Markets in Crypto-Assets Regulation (MiCA) and the future Market Integration and Supervision Package (MISP), which recognizes distributed ledger technology as a means of further integrating capital markets. In the near term, tokenized traditional assets will likely drive adoption ahead of native crypto assets.

6. Technology selection must prioritize architecture over single features

Custody technology providers are converging around real-time processing, ISO 20022, API-first connectivity, AI, and digital assets. However, they differ significantly in architectural philosophy and pace of execution. Composable, service-based models offer flexibility but add integration complexity; integrated platform models offer stability but may evolve more slowly. Over the next five years, custodians will differentiate themselves not through individual features but through the strength of their platforms’ data governance, real-time processing, multi-entity architecture, and AI governance. Custodians should evaluate technology choices against these foundations to achieve operational excellence.

Conclusion

Together, these insights point to one conclusion: custodians that treat technology selection as a checklist exercise will face a growing structural disadvantage. The institutions best positioned for the next five years will evaluate technology partners not by individual features, but by the foundations that support long-term operational resilience: real-time data infrastructure, broad API coverage, strong AI governance, and the ability to integrate with and progressively replace legacy systems.