Introduction  

Europe’s asset servicing sector is at a pivotal moment of its evolution: new regulations, continuously increasing client demands for real-time data, seemingly endless AI use cases, and a growing desire for digital assets. All of these factors are forcing asset servicers to adapt quickly or risk losing ground. From custody to fund administration, the entire operational chain must be adjusted to cope with T+1 settlement, tighter compliance standards, and investor appetites for transparency and innovation.

But here’s the twist: While talk of digital assets and AI often grabs the headlines, one other less visible innovation is slowly but surely happening in the backstage: digital transfer agents (TAs). Leveraging the latest technologies, digital TAs promise to rapidly reshape how investor onboarding, record-keeping, and even post-trade settlements are handled. Whether through in-house modernization, outsourced arrangements, new external solutions or shared “mutualized” infrastructures, asset servicers have no shortage of pathways. The real challenge? Figuring out which approach or combination best meets today’s demands without impairing tomorrow’s potential.

Why T+1 Settlement changes everything

In January 2025, the European Commission published EU Regulation No. 909/2014 regarding settlement cycles, stipulating that by the second half of 2027, Europe asset servicers will have to be fully compliant with T+1 settlement and settle trades one business day after trading. With one market and one central depository, the move to T+1 has been relatively straightforward in the United States. But in the European Union, coordinating a dozen-plus Central Securities Depositories (CSDs) across different countries is more challenging.

In their 2024 discussion paper on shorter settlement cycles, the European Securities and Markets Authority (ESMA) acknowledged that the transition will indeed require improved interoperability among market players, instant reconciliation, and strong data infrastructure.

For asset servicers, the implications are major. Settlement departments need real-time confirmation and near-zero tolerance for data lags, and fund administrators must ensure updated positions in hours, not days. These realities imply changes to the current operating models and adjustments to offshore strategies.
 

Rising costs, rising expectations

Of course, regulation isn’t the only driver of the needed evolution of the asset servicer. Rising operational costs are weighing heavily on many organizations. They face increased expenses from inflated salaries, energy costs, and maintenance for outdated IT systems. Additionally, the expansion of service and product offerings is contributing to higher costs, yet revenues are not increasing at the same rate due to the competitive landscape.

On top of this, in their 2024 report on asset management trends in Europe, the European Fund and Asset Management Association (EFAMA) has noted growing investor demands for real-time fund data to track performance, liquidity and risk exposure.

It’s hardly surprising, then, that asset servicers are pursuing one of two common routes: They either outsource non-core functions like regulatory reporting, fund accounting and tax computations to specialized providers, or they mutualize core technologies with other industry players, thereby dividing both costs and benefits.

This trend aligns with Deloitte’s 2023 Global Asset Servicer’s Survey, where more than half of respondents cited cost pressures and higher client expectations as their main reasons for exploring third-party solutions.
 

Digital TAs: The quiet catalyst

Digital transfer agents (TAs) are poised to be a promising solution for the needed transformation as they automate manual processes for share registration, investor onboarding, and ownership recordkeeping. Instead of working through documents or multiple spreadsheets, digital TAs rely on automated workflows often integrated with front-to-back platforms and often supported by distributed ledger technology (DLT).

And by using automated Know Your Customer (KYC) and anti-money laundering (AML) checks, digital TAs support faster transaction verification while also keeping investor records continuously updated. This gives managers the chance to oversee shareholder registers in near real time. Digital records also naturally reduce errors and cut reconciliation headaches by minimizing the risk of manual error.

These capabilities are an exciting development. While asset servicers have explored DLT’s potential over the past years, thus far they had demanded very little from this technology other than theoretical statements of capability, proofs of concept, or use cases. But with client demands pointing at concrete use cases with interested investors, we see a shift from theory to practice with the relevant new services allowing the usage of DLT.

Case in point: Within its 2023 Global Asset Servicing Survey, a Deloitte analysis revealed that 87% of respondents were either piloting or planning to invest in TA functionalities, often in parallel with broader blockchain initiatives.

Luxembourg, one of world’s prime fund domiciles, underscores the importance of digital TAs in its new Blockchain Law IV. This law introduces a control agent role that allows non-Luxembourg-licensed distributors or investment managers to run a Luxembourg-domiciled fund’s shareholder register on-chain, bypassing the requirement for a Luxembourg-licensed management company (ManCo), alternative investment fund manager (AIFM), or transfer agent.

Simultaneously, the forthcoming Markets in Crypto-Assets (MiCA) framework sets rules for stablecoins that facilitate a completely on-chain delivery-versus-payment (DvP) settlement. In such a setup, the cash leg no longer needs to be handled off-chain. This speeds up the entire process and reduces reliance on middlemen, a significant competitive advantage in a T+1 world. For many asset servicers aiming to meet investor calls for speed and transparency, these legal developments open new avenues to merge blockchain-based tools into core workflows.

Powered by digital assets and AI

The digital transfer agent transformation relies heavily on digital assets and artificial intelligence.

For example, digital assets promise a single and trustworthy ledger that eliminates the need for repetitive reconciliation, the European Commission has underpinned their capacity to reduce friction and fragmentation across borders. For asset servicers with multi-jurisdictional operations, the benefit of confirming trades and ownership via a shared ledger is difficult to ignore. Though a digital TA doesn’t inherently need blockchain, combining them can create a genuinely robust ecosystem.

As digital TAs offer to reshape daily operations, artificial intelligence (AI) is also helping drive the transformation via middle and back-office functions. AI is helping firms automate repetitive checks, identify root causes for errors, delays, and other inefficiencies, and even detect fraud. While trades proliferate and data volumes increase, the ability to process and interpret information in real time is sure to become a competitive advantage.

Balancing innovation with risk management

Despite its potential, such innovations also introduce new risks, a point the European Central Bank (ECB) frequently underscores in its official statements. Any heavy reliance on third-party solutions or platforms can expose firms to cybersecurity threats or broader systemic vulnerabilities, especially if many market participants depend on a single provider’s technology. Vigilant oversight, rigorous contingency planning, and exit strategies that protect business continuity are crucial.

For many firms, T+1 settlement is both a short-term pressure and a wake-up call for a broader transformation. While the immediate objective is to handle next-day settlement, the overarching goal is to build an organization agile enough to deliver near-real-time operations and data, automate workloads, and pivot fast when regulations or client volumes spike. Some asset servicers prefer to keep strategic functions in-house, while outsourcing time-consuming tasks. Others opt to shift entire value chains onto digital asset solutions. Either way, the need to remove outdated methods and integrate forward-looking approaches is becoming ever more pressing.
 

Finding the right balance for the future

As Europe’s asset servicers rethink their business models, technology’s transformative role is clear. Digital TAs, digital assets, and AI all have the potential to increase speed and transparency while reducing risk in a rapidly changing regulatory environment.

Not every approach will work for every firm, of course. Some will prefer tailored in-house solutions, while others will want outsourcing or mutualized. But many firms will need expert advice on regulatory guidelines, system design, implementation, and vendor relations.

It will be a clear, well-planned strategy that distinguishes a disruptive shift from something that is painful into something more pleasant, a seamless transition that sets the groundwork for the future. But no matter the path, the following is clear: Standing still isn’t an option.