Are you invested in agreement digitisation?
An independent market study by Aite-Novarica, commissioned by Acadia and Likezero, is a study focused on the evolution, adoption, benefits, and challenges of digitising agreement documents.
Key takeaways from the study include the following:
Financial markets are still living in an age when documents are creating data rather than data creating documents. Typically, agreement documents are stored in a PDF format, and some of the data is parsed using an optical character reader (OCR) or is extracted by other means. While the majority of survey participants indicated their documents were at least partially digitized, the captured data is far from complete. Costly manual processes and many additional legal hours are still necessary.
Commissioned by Acadia and Likezero, Aite-Novarica Group conducted a survey focused on the digitization of International Swaps and Derivatives Association (ISDA) contracts from June 11, 2021, to July 7, 2021. Firms in this study account for 59% of the total credit support annex (CSA) volume held within Acadia and span a number of firm types. Twenty percent of companies are prime brokerage firms. Another 20% consist of custodian banks. Meanwhile, the largest segment (40%) is made up of international banks. Finally, the remaining 20% of participants are large global investment management firms.
Using a proprietary model, Aite-Novarica Group analysts estimate that digitizing agreements saves between US$1,100 to US$2,100 per agreement when considering data that captures outright cost and risk. This includes securing the agreement and/or amendment terms after negotiation in a system and reconciling the data obtained with counterparties to resolve business exceptions on an as-needed basis. Digitization leads to an estimated savings of US$622 million to US$1.19 billion across existing agreements, savings of US$42 million year on year for new CSA agreements, and savings of US$126 million year on year across all types of agreements (CSAs represent 33% of all agreement types).
Watch our latest video “Understanding the business case for digitisation of collateral agreements” here.
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