Digital assets are on the rise, and relevant custodian services are mushrooming. If your startup needs an asset keeper, be it traditional or digital assets, you have two options: build one or integrate one.
To achieve maximum data and funds protection, you’ll need to integrate top custodians in the market. In this article, I tell you about the best choices for traditional and digital asset custodian services. Also, you’ll learn how custodian integration can save you development cost, increase security, and make your customers happy and satisfied.
What’s a custodian, and what can it do for your customers
Your money can’t be 100% safe, even 1000 meters underground. But regulated and established custodian service providers work day and night to provide the best security possible for your cherished assets. If you’re a passionate decision-maker in a Fintech startup, you’d want the same protection for your customer’s finances as for your own.
A custodian is much like a guardian angel for your finances. It’s a financial organization — an institution, company, or specialized bank — keeping your securities on your behalf. Acting as fiduciary, a custodian protects your assets from any kind of fraud or loss.
Besides their primary responsibility, financial professionals of a custodian can also help you with other securities-related services. They can include the following:
- Attending to dividend and interest payments
- Processing transaction settlement
- Assisting with compliance and taxes
- Administering foreign exchange and brokerage account
Why integrate a custodian instead of building your own system
All the services I mention above sound serious enough to make one reconsider building their own procurement solution if they already have a product to offer. But if you need another argument, you have it: the cost.
Manually developing custodian processes is costly and can easily sweep you off the sweet spot in the market. You can draft a budget to compare in-house development with using a third-party global custody solution, but you will waste your time getting the same answer I’ll write in a second — the first option is a lot more expensive. Custodian solution providers will ensure speed, easier scaling, and, most importantly, robust security. Also, they provide their services according to the ever-changing regulatory and investment management requirements and market conditions.
By integrating trusted custody services, you let your customers have a familiar provider at their fingertips. If your solution users are wealth managers or advisors, you'll have to stick to their preferences to keep them satisfied or to see them as your customers at all.
Best custodian providers
If I had to limit myself to just three of them, I’d pick the ones I mentioned below. But honestly, there are at least a couple more in the U.S. The holy trinity of custody is as follows, though.
Bank of New York Mellon
BNY Mellon is known for its first-class 24-hour international coverage and asset performance monitoring. Its Digital Asset Custody platform provides the same quality for cryptocurrency and other digital asset holders. Pershing is its subsidiary, a clearing and custody services provider.
Charles Schwab
One of the largest custodians, Charles Schwab works procurement magic full-service and provides a security guarantee. It owns another prime custodian—TD Ameritrade, serving over 6,000 independent registered investment advisors.
J.P. Morgan
I bet you’re tired of the words “prime” and “leading” by now, but that’s what J.P. Morgan is. The digital experience you get is unapologetically seamless and customized.
OK, I can squeeze in a couple more focused on digital assets.
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Coinbase Custody holds the lion’s share in crypto custody: over 90% of crypto by market cap. It’s 24/7 full-feature services for approximately 400 cryptos and tokens. The best fit for retail traders will be Gemini Custody, and Anchorage is famous for its advanced security measures, including biometric authentication, multi-signature approval, and institutional-grade insurance coverage.
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Let’s talk examples: Pershing
By integrating Pershing, you provide your customers with access to leading investment data and analytics, trading, and rebalancing services. If your startup offers a Wealthtech platform or other investment management solution, it’s one of the best choices you can make.
See, when you integrate the custodian, advisors of a particular firm using your platform can open custodian accounts through it faster than directly with Pershing (or any other custodian). Believe me, advisors and private wealth managers will thank you for it: such integration lets them speed things up for their clients. Technology-wise, it looks like this:
- 1. Your team (or vendor responsible for the integration) gathers investor data, sorts it, and forms it into a document (having DocuSign integrated will be a plus at this point).
- 2. The resulting DocuSign document gets signed.
- 3. Once signed, the document is sent to Pershing as API requests and documents.
- 4. Pershing sends newly created accounts in custodian daily jobs.
- 5. The process is much faster than requesting an account opening directly to Pershing. The accounts created through your platform will support the same in-and-out cash transfers, including trading operations, as other accounts.
Wrapping it up
Integrating a top-class custodian for the complete protection of your customer’s finances is one of the most thoughtful decisions you can make as a banking or Fintech company decision-maker. By integrating custody services into your financial solution, you:
- Protect customers’ assets;
- Enhance your compliance with regulatory requirements;
- Offload safekeeping duties;
- Ensure online reporting transparency and more.
Choosing a custodian or thinking through its integration to make it smooth, save cost, and keep quality up to standard is challenging. If you need an expert opinion of a team who has done such integrations more than a couple of times, contact our experts for a complimentary consultation.