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January 30, 2015updated 05 Jun 2017 11:19am

Not straight-through: the need for automation in private banking

Operational efficiency has been an impending concern for private banks, yet it fails to get the attention it requires. Timetric, in association with SmartStream, hosted two executive briefings with private banking executives in Hong Kong and Singapore on enabling efficient middle and back-office operations. Sruti Rao highlights the key takeaways

By Sruti Rao

Operational efficiency has been an impending concern for private banks, yet it fails to get the attention it requires. Timetric, in association with SmartStream, hosted two executive briefings with private banking executives in Hong Kong and Singapore on enabling efficient middle and back-office operations. Sruti Rao highlights the key takeaways

 

Hong Kong Executive Briefing:Renaissance Harbour View Hotel

Panel 1: The need for speed: keeping up with expectations on service efficiency

Joe Kubeyka, regional director, Asia-Pacific, SmartStream– David Gilmour, partner, Hong Kong – Banking and Securities, Deloitte

Panel 2: Embracing straight-through processing: how do we get there?

Stephen Murphy, country manager, Greater China, SmartStream– Andreas Rudorfer, director, Business Solution Group APAC, SmartStream– Suneet Gorawara, executive director, Financial Services, EY Hong Kong

In the context of ever-growing Asian wealth, private banks have been grappling with a task of delivering efficient, customised and accurate advice through the digitisation of their services.

Demands of the multi-banked, tech-savvy Asian clientele can only be met with the support of competent front-to-back data flows.

The executive briefings organised by Timetric in association with SmartStream, held at the Raffles Hotel in Singapore and at the Renaissance Hotel in Hong Kong, focused on the operational component of this service structure and discussed the impact inefficient back-office operations can have on banks’ front-end services.

Transaction-centric Asian clientele

Currently, the operational struggle is the aspect of integrating multiple systems into one synchronised unit.

As panellist Andrew Tinney, partner, head of management consulting (ASEAN) and head of financial services advisory (Singapore) KPMG, pointed out, the lack of transparency between the front-end and the back-end is still lacking in the industry, which in effect is hindering service quality.

Tinney commented: "Anytime, anyplace, anywhere (service) is what is expected of private banks now, something that many firms struggle to deal with."

In both Singapore and Hong Kong, Asian clients are recognised to be more transactional and capital-markets-heavy in their interactions with private banks. This creates a greater need for data efficiency in the back office systems, pointed out Tinney.

"In Europe, the model is still dependent on the relationship. Asia (non-Japan) is much more transactional and hence has a lot more trading activity. That’s where the importance of the types and systems and processes is critical," Tinney said.

The issue of multiple IT systems used to deal with the numerous services of the bank resonated with the audience and the panel members in both markets.

 

Singapore Executive Briefing: The Raffles Hotel

Panel 1: The need for speed: keeping up with expectations on service efficiency

Joe Kubeyka, regional director, Asia-Pacific, SmartStream– Andrew Tinney, partner, head of ASEAN MC and Head of FS Advisory (Singapore), KPMG

Panel 2: Embracing straight-through processing: how do we get there?

Mark Taylor, sales director, Asia-Pacific, SmartStream– Steven Seow, head, Wealth Management, Asia Investments; principal, Mercer

Power of integration

Financial institutions may have to deal with 30 to 300 systems, and integrating them is a difficult task that takes longer for information to be delivered to the front-end.

Back and middle-office service provider SmartStream deals with the element of data accuracy and real-time trade reconciliation capability that is delivered through its Operational Control Centre (OCC).

Complementing existing IT systems with the tools to screen and monitor the data moving to the front-end from the trade-reconciliation and data-management side is the need of the hour, according to Joe Kubeyka of SmartStream.

Kubekya said: "It would be ideal for us to manage everything under one system. But the truth is that banks still depend on a number of systems. It is impossible to be 100% integrated.

"Where SmartStream comes in is to have a holistic view of the back-end to ensure data accuracy to the front end."

Kubeyka further commented that due to the client-centric nature of private banking, the real-time element of trade reconciliation is required because any errors or mismatches that occur should be alerted before they reach the client.

Need for automation

A critical weakness in the operating systems is the lack of automation and straight through processing (STP). Private banking operations are only approximately 30% automated, compared to a 60%-70% automation at the investment banking arms.

Kubeyka added: "With manual processing and more hands-on trades, there’s more of a chance for errors occurring. With trade mismatches that could lead to severe losses at banks."

Andreas Rudorfer, director business solutions group, SmartStream Asia-Pacific, commented: "You have a nice front-office system and you have investment in STP going into that piece, but as soon as you go towards the middle or back-office, STP usually stops.

"You can, of course, have manual verifications in the back-office, but with the growth rates you see in Asia, you just can’t do it in the time that you need it."

Prevention better than cure

The silver lining is that private banks are gradually starting to realise that there is a need to upgrade their systems for better straight-through processing. Tighter profit margins have compelled private banks to realise that the dominant way of survival is through cost-effective processes.

However the practical challenge still remains allocating IT spend towards such improvements. Regulatory reporting and front-line digitisation implementations still remain an eminent concern, even with the growing IT budgets being allocated within the industry. Time will tell if automation will gain a stronger focus.

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