The Asset Servicing Inflection Point: When Industry Economics Shift
Every asset servicer recognises the pattern: operational complexity increasing faster than revenue growth. Private credit mandates that looked attractive in business development creating unexpected operational demands. Client expectations for reporting and data access that seem to ratchet up each year. The infrastructure and processes that worked well a decade ago now feel strained.
Something fundamental is changing in asset servicing economics and service delivery. Understanding these shifts matters because they’re reshaping competitive dynamics in ways that will define the industry for years to come.
The changing economics of scale
Asset servicing has historically operated on relatively straightforward unit economics: more assets under administration meant more revenue, with costs scaling somewhat predictably. That relationship is becoming more complex.
Operational costs are rising at rates that challenge traditional pricing models.1 Staffing represents the most visible element. Many servicers have expanded headcount substantially, yet revenue per employee hasn’t kept pace. The gap between what high-performing servicers achieve in productivity and industry averages suggests this isn’t purely a market-wide phenomenon. Some operating models are proving more sustainable than others.
What’s less visible is the infrastructure cost trajectory. Legacy systems consume increasing portions of IT budgets simply for maintenance and keeping-the-lights-on activities.2 Each new client requirement, regulatory change, or asset class expansion often requires custom development or workarounds. Integration complexity grows exponentially, not linearly.
Teams spend considerable time on activities that don’t directly serve clients: data reconciliation between systems, manual report compilation, error investigation and correction.3 These aren’t new challenges, but their scale has grown whilst tolerance for the delays they cause has shrunk. The traditional response of adding more people addresses immediate capacity constraints but doesn’t resolve the underlying structural issues.4
The service expectations evolution
Client expectations for asset servicing have undergone a generational shift. What constitutes acceptable service today bears little resemblance to standards from even five years ago.
Investment managers increasingly expect rapid access to data, sophisticated self-service capabilities, and reporting flexibility that legacy service models struggle to provide.5 The shift isn’t about wanting more information. It’s about wanting different interactions with that information. Quarterly reports delivered via PDF feel increasingly anachronistic when consumer banking apps provide real-time position updates and instant transaction history.6
New entrants built on modern architectures can offer capabilities that established servicers find difficult to match7: faster client onboarding, superior data access, more flexible reporting, better digital experiences. These aren’t marginal improvements. They represent fundamentally different service models enabled by different technological foundations.
When prospects evaluate service providers, technology capability has moved from nice-to-have to essential. RFPs increasingly feature detailed technology assessments. Questions about API availability, cloud architecture, data accessibility, and portal capabilities aren’t supplementary. They’re primary evaluation criteria.8
The threat isn’t that new entrants offer cheaper service. It’s that they offer demonstrably better client experiences in areas that matter increasingly: speed, flexibility, and data access. The capability gap has evolved from inconvenience to genuine business risk. What clients actually mean by “service” is changing, and the implications run deeper than most servicers initially recognise.
Why this moment feels different
Industries periodically face structural transitions where established operating models come under pressure. Asset servicing appears to be navigating one of these shifts, and several factors suggest it’s substantive rather than cyclical.
The talent dimension is particularly acute. Legacy systems depend on specialised knowledge concentrated in ageing workforces. Younger professionals show limited interest in acquiring these skills,9 preferring to build expertise in modern technologies with broader career applicability.
Innovation capacity atrophies under operational load. When technology teams focus primarily on maintaining existing systems, there’s minimal capacity for improvement.10 Service launches that should take weeks require months or years. Meanwhile, competitors built on modern architectures iterate rapidly, compounding the capability gap over time.
Technical debt accumulates exponentially. Each workaround creates future constraints.11 What could be addressed through planned evolution today becomes crisis-driven transformation tomorrow, invariably at higher cost and greater business disruption.
Market position erodes gradually, then suddenly. Early movers on infrastructure modernisation build compounding advantages12: superior client service enabling retention, operational efficiency funding further investment, rapid iteration enabling new service launches. The gap between leaders and laggards widens.
Questions worth asking
Rather than prescribing answers, perhaps the more useful exercise is posing questions that illuminate strategic positioning:
On economics: Are your operational costs per client increasing or decreasing over time? Can you scale without proportional headcount increases? Where does your IT budget actually go?
On competition: When you lose competitive evaluations, what reasons are cited? Are you winning the same types of mandates you won five years ago?
On clients: What do your satisfaction scores actually tell you? Are complaints about speed and capability or about accuracy and service quality? How do your digital capabilities compare to what clients experience in their personal banking?
On talent: Can you attract the technology talent you need? What skills will you need in five years that you’re not building today?
On innovation: How long does it take to launch a new service? Is your roadmap driven by strategy or constrained by technical limitations?
The answers to these questions matter more than universal prescriptions about what asset servicers “must” do. Different servicers face different circumstances, serve different markets, and have different strategic options available. The urgency of action depends heavily on where you sit and where you’re headed.
What’s becoming clear, however, is that the infrastructure and operating models that powered growth in the previous decade face increasing strain. Client expectations are evolving faster than many service models can adapt, and the gap is widening.
Citations
1 81% of Asset Servicers cite fee pressures from asset managers being passed down as a significant business challenge. Deloitte Global 2025 Asset Servicing Survey, p.39
2 92% of Asset Servicers report their ability to innovate is partially constrained by legacy systems. Core systems modernisation currently consumes 20% of IT budget. Deloitte Global 2025 Asset Servicing Survey, p.11-13
3 79% of asset servicers cite manual workflows and lack of standardization as the key operational hurdle. Only 21% have most or all processes digitalized. EY Luxembourg Benchmarking Survey 2025, p.6
4 Offshoring budget is forecast to fall from 13% (2023) to 7% (2030) as firms shift toward managed service providers and automation including AI. Deloitte Global 2025 Asset Servicing Survey, p.39-40
5 94% of firms now view client expectations for real-time data and insights as a baseline requirement, up from 40% in 2021. Deloitte Global 2025 Asset Servicing Survey, p.9-10
6 Only 10% of asset servicers use advanced methods to communicate with clients. In 2022, 77% relied on emails and PDFs; progress remains limited by 2025. EY Luxembourg Benchmarking Survey 2025, p.12
7 Asset servicers who fail to embrace digital innovation risk being sidelined by tech-powered players with the potential to dominate the market. EY Top 5 Trends in Asset Servicing 2025, p.1
8 Asset Servicers find F2B mandates harder to win unless they allow flexibility in operating models and systems architecture. Managers leverage competitive RFPs for bespoke builds. Deloitte Global 2025 Asset Servicing Survey, p.33-34
9 64% of respondents report a skills gap in emerging tech; 55% cite a lack of industry-specific expertise. Firms rely on online learning (65%) to address gaps. Deloitte Global 2025 Asset Servicing Survey, p.43; EY Luxembourg Benchmarking Survey 2025, p.6
10 Investment in innovation and digitalisation is set to rise from 27% to 38% of budget over five years, as firms complete core modernisation and pivot resources. Deloitte Global 2025 Asset Servicing Survey, p.11-12
11 Legacy technology is the biggest challenge in delivering F2B platforms, affecting 92% of firms. 75% plan significant IT upgrades or replacements within three years. Deloitte Global 2025 Asset Servicing Survey, p.13, 35-36
12 Only 22% of multi-asset managers, 29% of banking captive managers, and 20% of pure play managers would recommend their current asset servicer. 27% still developing F2B offerings risk being outpaced. EY Top 5 Trends 2025, p.8; Deloitte Global 2025 Asset Servicing Survey, p.33
