Future Focus – Workflow Efficiency in FX……Back to the Future
Using technology to achieve workflow efficiency in FX has been discussed for decades, with financial firms continually attempting to cut back office costs and deliver Straight Through Processing (STP).
Front-office technology advances have captured the headlines during times of market volatility, like those currently experienced in FX. Yet it is the boring but important area of automating the middle- and back-office that continues to deliver financial benefits, especially during times like these when there is a spike in confirmations and settlement volumes.
"Many banks have cut costs by reducing front office staff numbers. This impacts the immediate cost base but is prone to cyclical reversal in the event of an upswing in volatility and business opportunity," said Keith Hill, Advisory Board Member at Caplin. "However, this doesn’t address the structural changes in processes and operations necessary to realise substantial and consistent efficiency gains in the long run."
He added, "We are seeing a lot of interest in services which increase workflow efficiency in the back-office, like supporting a bank's foreign payments function."
Back-Office Automation for FX Payments -
Making foreign payments has traditionally been an area that requires high levels of manual intervention. Bank processes include the need to review settlement instructions for "fat-finger" errors which cause payment failures. Manually checking all bank details, such as Routing Codes and IBANs, takes time.
Caplin has developed a product specifically designed to automate these corporate FX payments, which reduces the manual workload for banks, puts more activities in the hands of corporate customers, and ultimately improves the accuracy and timeliness of payments. Called FX Corporate, it combines a confirmation workflow with Settlement Instruction verification, which integrates with a database of worldwide bank settlement details, ensuring that settlement instructions are correctly submitted.
For clients, the platform has an integration API which enables integration with existing workflow systems.
The efficiency gains can be sizeable. According to one US bank client, this has reduced the time spent manually verifying details by more than 50%. Post trade settlement takes minutes rather than days of manual intervention, with automation leading to reduced costs, increased accuracy and improved customer service.
The Future - More Automation Tools -
Caplin is already developing solutions for banks to provide their clients with visualisation tools for cash flow via a calendar or graphs. These will support payment forecast schedules and ensure that payments are made on time.
Perhaps unsurprisingly, especially as more people work remotely, extending confirmation functionality to mobile is also in development. Customers can be kept informed of crucial deadlines and the process of reviewing and approving payments can be performed on the move.
Back-office Efficiency is Back in Vogue....or maybe it never went away -
According to Keith Hill, "More firms are now reviewing their middle- and back-office functions, aiming for substantial cost reductions through the deployment of new technology and through exploring the outsourcing of certain functions."