While the present lies in the capable hands of financial technology firms operating efficiently and seamlessly in financial institutions, the future lies in the hands of innovators. As margins get squeezed and cost income ratios climb high, the question of whether to consolidate or outsource is an increasingly relevant one for private banks in Asia.
Indeed, private banks in the region are finding themselves in a catch-22 situation with regard to technology budgets. On one hand, virtually every bank needs to address the demands of increasingly tech-savvy clients, and the increase in efficiencies from heavier digitalisation. On the other hand, up to 70% of a bank’s technology spend is typically injected into the back end, leaving little resources for its “run-the-bank” and “change-the-bank” mandates.
The solution? Outsource the back office to a new business process outsourcing (BPO) model, says Avaloq’s newly formed subsidiary Avaloq Sourcing Asia Pacific. In September 2014, Deutsche Asset & Wealth Management became the first Asia-based client to shed its legacy system in favour of the new BPO model. This is due to go live by end-2015.
While outsourcing back office operations like corporate actions or payment transactions is not new to banks, Avaloq’s evolved 3rd generation model promises to shave off up to 30% of operating costs and help private banks stay architecturally light.
Avaloq Sourcing Asia Pacific also became Singapore’s first dedicated business process outsourcing centre for the wealth management banking sector, and Avaloq’s third BPO centre globally.
With its efforts to drastically reduce a bank’s operating cost through its IT infrastructure – which in turn creates room at the front end in terms of both infrastructure and budget – Avaloq is Asian Private Banker’s choice this year for the coveted Most Innovative Solutions Provider award.