Today, a growing number of banks and wealth managers are striving to bolster operational efficiency. One focal point in their pursuit is the back office. This article explores the significance of banking operations outsourcing within a business process as a service (BPaaS) model and delineates its benefits for financial institutions.
Seizing the opportunity to innovate and transform
The financial industry has been characterized by ongoing margin compression and increased competition for the past few years. These trends are forcing firms to boost their efficiency, look for new revenue sources and reduce time-to-market.
Clients, especially the tech-savvy younger generation, increasingly expect highly personalized services for lower cost. This demand has given rise to digital-only challengers that operate efficiently with modern systems and lean fee structures.
Moreover, many firms continue to grapple with labour-intensive back-office processes that limit scalability and innovation. For example, a private bank seeking to expand into the affluent market will have to transform its operations to handle higher transaction volumes, serve more clients and diversify its offering.
Leveraging BPaaS for standardization and automation
Recognizing these inefficiencies as opportunities for improvement, banks and wealth managers can entrust specific back-office processes to a specialized service provider within a BPaaS model. Unlike classic outsourcing, BPaaS entails standardized and highly automated processes, leveraging optimized core banking technology.
This strategic approach streamlines operations, trims costs and bolsters compliance. Consequently, it frees up banks and wealth managers to focus more on their core functions while advancing their growth plans.
Firstly, BPaaS empowers banks and wealth managers to enhance efficiency through automation. With the potential to handle up to 80% of repetitive back-office tasks like payments processing, automation not only minimizes the risk of human error but also significantly shortens processing times.
Avaloq's Banking Operations offering, for example, harnesses 191 live bots, including cognitive AI bots, to automate 97 processes, such as the sending of emails to request missing custodian information. This innovation results in average straight-through processing (STP) rates of 98.3% and close to 100% service accuracy.
Secondly, BPaaS allows firms to shift from fixed internal costs to an external pay-per-use model, aligning expenses with actual demand. This transition not only reduces financial strain but also enhances operational flexibility.
Specialized providers like Avaloq continually invest in process quality, risk controls and business continuity. This helps mitigate operational risks and improve service quality. Working with a single provider also allows banks and wealth managers to share regulatory compliance costs with a broader client community, generating additional savings.
Finally, BPaaS gives firms seamless access to regional expertise through a specialized service provider. This eliminates the need to establish complex and costly local back offices for international expansion.
“Having access to a world-class, state-of-the-art solution at a fraction of the running costs involved in doing it ourselves frees up resources, enabling our growth.”
Simon Durrance, COO of FAB Private Bank (Suisse) SA
Orchestrating the back office
Over the coming years, traditional financial institutions will face mounting pressure from clients and regulators to lower fees and enhance their competitiveness. BPaaS emerges as the strategic solution, offering banks and wealth managers an effective means to meet these demands. With BPaaS, firms are empowered to not only control costs but also to elevate their value proposition.
Avaloq Banking Operations allows banks and wealth managers to successfully streamline their back-office processes, achieving industry-leading STP rates of up to 99.7% for payments. Avaloq handles high levels of market complexity on clients’ behalf, managing over 50 custodians, 60 correspondent banks and 400 agents, and 38 million transactions per year as a trusted orchestrator. Avaloq’s advanced technology harnesses the power of cloud computing and robotics to automate manual processes. The combined strength of the Avaloq Core Banking Platform and Avaloq Banking Operations allows banks and wealth managers to scale their business faster and bring new offerings to the market swiftly.
Transform your back office today
Explore Avaloq’s Banking Operations service. Download our brochure and step into the future of efficient processes.
