The back office is commonly seen as commoditized and non-differentiating. However, as our new survey on sell-side banking demonstrates, many bank leaders see a growing opportunity to reinvent the back office, and make it more streamlined and efficient. So what cold the back office of tomorrow look like?
Today’s back office is ripe for outsourcing-driven automation, and back office professionals in the survey seemed to agree. Of 464 overall respondents, 41 percent said automation will be the most important trend over the next five years, and 84 percent said increased automation will affect their businesses.
Those numbers aren’t much lower than the responses from those who only work in the back office. Fify-six percent of those respondents said automation will be the most important trend for their businesses, while 86 percent said increased automation will affect their businesses.
It’s important to remember, though, that automation doesn’t just mean fewer manual processes. While process automation does eliminate a lot of manual work – as well as improve controls and reduce operational risk – but data automation can be just as important.
Most people immediately start talking about big data solutions when they hear the term data automation. However, the reality is that the industry has a much more fundamental data problem across the transaction lifecycle. From the moment a trade gets executed to the time it settles and reaches the general ledger, that trade data, as well as its supporting reference data, may have been copied five times or more.
Each one of those copies requires reconciliation between each system storing the data. Reducing the number of times data is copied, and then using automation to improve the efficiency of the reconciliations that do remain, can significantly reduce the amount of reconciliation effort and risk. It also can improve the accuracy of reporting – internally and to regulators.
Basel II and Basel III are great examples of massive data aggregation and data reconciliation initiatives. Meeting those regulations costs the biggest banks hundreds of millions of dollars or more every year as they aggregate and reconcile data. Automation offers an enormous opportunity to reduce the cost of maintaining data. It also improves value for shareholders by allowing a firm to invest instead in more cutting edge projects and technologies.
The successful firms of the future will require unique applications of emerging technologies to compete and differentiate themselves. Investing in new technologies on a year-after-year basis gives firms a distinct edge by being the first to evaluate and shape the technologies of tomorrow, as well as separate the more valuable reality from costly hype.
Pilot projects to prototype new technology are a must and, if firms don’t invest, they risk taking another firms’ word on whether a technology is applicable, useful and ready for prime time. That could put them in the position of missing out on important information, and could mean the difference between ongoing viability or having to exit a particular business because they’ve become stale or have lost customers.
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