BPaaS (business process as a service) is about offering our clients cost-effective access to the building blocks of banking – services like payments processing or securities transactions – via a flexible pay-per-use model.
Avaloq’s banking operations are based in three centres, in Germany, Switzerland and Singapore. We have now started to build out this structure and connect the existing centres to create a global banking operations organization, establishing a standardized model for our service centres. We refer to this transformation programme as Project UNITE (see below).
A global banking operations network
This will streamline current operations, provide greater resilience and create a solid basis for future growth. Three core initiatives underpin this transformation:
- Continued focus on end-to-end automation, improve efficiency and quality and reduce risk
- Development of centres of excellence supporting the standardization and centralization of banking operations around the world, with back-up locations to ensure coverage across all time zones
- Talent management and skills development
The advantages of this enhanced banking operations organization for our clients include:
- Coverage of different time zones, with the ability to process 24/7
- Better load balancing and improved business continuity
- Local expertise in relation to market-specific requirements, regulations and banking products
- Standardized service delivery across markets the bank operates in
Software automation and continuous improvement
In recent years, we have applied our continuous improvement methodology, inspired by Toyota’s kata or “way of doing”, to optimize quality and reduce risk.
This has helped us increase the rate of straight-through processing (STP) in several key areas of banking operations (see table below). We will continue to follow this approach to increase direct automation within the core banking software, with a specific focus in 2018 on automating corporate actions.
We are also looking into managing counterparty standing instructions centrally, rather than by client, as we believe a single source of truth will ensure consistency and reduce errors. Further down the road, we intend to look at how we can improve automation in areas such as securities transfer and derivatives.
STP rates achieved by our Swiss service centre (2017)
Reversal rates achieved by our Swiss service centre (2017)
30 new robotized processes for 2018
In addition to improving automation within the software, we have started applying robotic process automation (RPA) to improve automation across systems and reduce manual activities.
In 2017, with the assistance of Deloitte, we established a robotics infrastructure for our Swiss service centre, using Automation Anywhere. We developed an initial ten robots, in areas including global trade processing, global income and market messages, that integrate Avaloq with third party software such as Microsoft Office, global messaging and web-based custodian tools. The result has been a reduction in processing time and the further elimination of manual errors.
We have also worked with individual banks (including UBS, ZKB, Vontobel and Pictet) to share knowledge around best practice processes in banking operations that could be robotized, and created a new RPA centre of excellence to share knowledge, skills and experience.
We have set up a dedicated development team focused on scoping and developing new automated robotic processes, with the aim of further reducing the remaining manual processes, boosting service quality, eliminating risks and speeding up processing.
By the end of 2018, we plan to develop an additional 20 robotized processes.
The next phase will be to investigate the application of artificial intelligence alongside automation to eliminate more manual actions and reduce the time required to process non-STP transactions. We are investigating three use cases to build proof-of-concept projects and assess the benefits and the investment that would be needed to integrate AI.
Automated controls for 80 banking operations processes
A key 2017 initiative was the launch of a control room in our Swiss service centre, from which we can centrally monitor operational risks and the related controls in the Avaloq Banking Suite, in near real-time and across all banking operations departments.
This concept will be rolled out globally. In the past, these control activities were carried out manually by each banking operations team. Today, we can automatically identify exceptional transactions where special action might be required and trigger an alert on a central dashboard in the control room. An email is then sent automatically to the process owner in the affected team, so that relevant action can be taken. The central risk management team ensures that all issues can be addressed promptly and handled appropriately.
When we embarked on this initiative, we identified 80 controls in banking operations that we wanted to monitor. We implemented the first wave of automated controls in October 2017 and will implement the remaining controls in Q4 this year. During our annual risk assessment of all banking processes, we will identify any further controls that are needed.
Standardization and centralization of banking operations
In 2017, we launched UNITE, aimed at standardizing, automating and centralizing all our banking operations that do not make use of client-identifying data. All services and transactions that involve client-identifying data, such as tax reporting, will, of course, remain strictly local.
Our aim is to establish centres of excellence to offer our clients the highest levels of expertise and a harmonized service offering across continents and time zones. This new organizational structure will also help in managing peak loads.
Avaloq Global Banking Operations services
We will continue to interact directly with our clients through local service desks, which will remain the single entry point for banking operations service requests. Transactions will be handled by centralized global competency centres or, where client-identifying data is involved, by regional teams. There will also be service delivery managers in each banking operations area to handle client requests and manage continuous improvement of our services.
Operational skills development
Today we have more than 350 banking operations staff. To support the UNITE initiative, we are investing heavily in staff development, as we anticipate that automation will progressively shift the workload for banking operations employees away from manual data entry and towards exception handling. With the centralization of many activities, banking operations staff will need to broaden their knowledge across markets and stay up to date as market requirements evolve. We are putting in place several new initiatives in banking operations skills development:
- Alongside the courses offered by the Avaloq Academy, we are introducing specific staff courses aimed at reducing the number of incidents in banking operations.
- We will offer an international banking certification course for key staff and provide language training in all centres.
- We are using a karate-style black belt skills management programme across all service centres. This tool allows competences to be managed efficiently and can also be used to set up job rotation programmes.
All these improvements will be managed globally, to make sure skills and knowledge are evenly distributed and that all locations can benefit from similar competencies. This initiative will create a modern banking operations organization composed of highly skilled staff with a clear understanding of our end-to-end processes and the impact of technical changes – a team that can address client concerns efficiently and successfully manage an increasingly complex business.