Learn more about our Post-Trade digitalization solution, which increases flexibility and ensures additional security to capital markets businesses.
other financial institutions are currently facing a dilemma – how to enable
financial services offerings at a time when there are margin pressures on the
business and limited funds available for new technology and projects.
Complicating this are legacy technology systems inside banks, which in many
cases date back decades. These firms need a model to acquire applications and
components to build an infrastructure that can support their business model.
One of my
colleagues and founders of LPA Group, Roland Probst, has an analogy that can
make it easier to envision this model. He believes that banks could learn from
how the automobile industry has evolved. Over the past two decades, carmakers
large and small have shifted away from fully owning and operating the means of
production, towards a focus on sales, marketing and service. While they focus
on client-facing activities, and the assembly process, their upstream component
production and sub-assembly is now entrusted to partners inside the supply
chain. The only thing that makes this possible is strong third-party
relationships that meet industry-level quality standards built around the
This is an
exciting potenial direction of travel for the banking industry. In this
article, we look at a recent collaboration between LPA – developers and
consultants for technology-based capital market solutions for banks, insurance
companies and fund providers – and a major global investment bank that
addresses challenges banks of all sizes and geographies have been struggling to
The importance of internal collaboration
This particular project started from an existing
LPA client seeing how the LPA Capmatix platform could be leveraged for
post-trade processes. The bank realized that functional gaps would need to be
closed to support post-trade specific processes and the joint project was set
up to combine the bank’s market and post-trade process expertise with LPA’s
development capacity and understanding of financial technology. This was
something that emerged organically inside the bank operations team – rather
than coming from strategy or IT planning.
The objective of the project was not to build a
custom solution but rather a fit-for-purpose product, which could be adopted and
used by other banks in a software-as-a-service model.It was designed to fit
into a bank’s architecture as a complementary solution to replace individual
modules or as a new asset-agnostic central utility platform replacing existing
The result is an extension of LPA Group’s
Capmatix product – a one-stop-shop solution with highly configurable modules
that can be used for digitizing processes in banks. The final result is a
product that works across pre-sales, through trading and on to post-trade
processing. Designed to improve ‘Straight Through Processing’ (STP) in the post-trade
area, Capmatix allows users to introduce additional control measures while
improving the bank’s key performance indicators relating to service level
agreements and the level of straight through processing.
This partnership shows that vendors and banks can
team up to design, build, implement and subsequently run projects with both
internal buy in and the ability to be useful for both parties afterwards. A single
project can act as a proof of concept for skeptics and other potential buyers
inside an organization, demonstrating how an outside company can coordinate and
organize multiple parts of a large company towards a common goal.
Post-trade systems are like many parts of a bank’s
infrastructure – they don’t provide money for the bank but they are
mission-critical functions. For post-trade, this means the ability to efficiently and quickly process different
asset classes such as derivatives.
Therefore, measuring the impact of the system won’t be as
simple as measuring the new customers that sign up because of this new
functionality. People don’t decide where to trade based on their bank’s
post-trade system provider.
After this recent implementation, users will realize the
- Reduce costs – The bank’s
existing infrastructure required licensing payments to multiple software
providers. This integrated system jointly developed with LPA removes that need,
saving the firm a significant amount of money over time.
- Improved efficiencies – Greater efficiencies and enhanced agility will enable
employees to focus on client facing activities or other more value-adding
duties will also reducing operational risk.
- Better client service – A modernized and streamlined process will
have less risk of failure, reduce the number of manual processes needed across
post trade processing through automation, and consolidate overlapping IT
systems. This means fewer delays in processing and fewer false exceptions,
which is something clients notice.
- Faster time to market – With the creation and deployment of a new common
infrastructure with low code configuration, the bank can reduce
how long it takes to bring future products and services to market. The bank can innovate and implement new
features and products to the processes without IT involvement
Building a sustainable model
and replacing existing platforms – which sometimes ran on archaic system
languages such as COBOL – this project is a beachhead for broader
transformation inside the bank. The new post-trade system will be used by a set group
of users first with the capacity to easily add more. It will be relatively simple and cost
effective to add support for additional functions or asset classes, meaning the
return on investment will multiply in value. It will also support enhanced
customer service and security, and have a platform that can respond to
regulation quickly. This is a model for great organizational agility and change
that can fit inside shrunken research and development budgets.
Conclusion: A new path
In the same way
the automotive industry has embraced the mega-changes that have reshaped their
businesses (electric car, driverless technology and moving to more a
collaborative operating model) banks are increasingly realizing that strategic,
trusted vendors will have their best interests at heart, supporting a more
agile, symbiotic future.
This industry has
faced its own existential challenges recently in the form of the Global
Financial Crisis and subsequent waves of regulatory requirements that have led
to margin compression, adaptability is one of the key factors for bank
survival. Innovation through partnership represents a promising way to continue
to meet these and any forthcoming headwinds. All of this means banks now need
their software to work harder. This means going beyond data collection towards
using cloud-based artificial intelligence to detect patterns and guide
improvements previously undetectable. Smart intelligence
and dashboards allow for the setting and refinement of key performance indicators that
ensure continual improvement against past performance or desired targets or
In the case of this
specific project, the main driver for implementing the new platform was indeed
to extend agility and automation to include its post-trade activities. Interestingly,
the perspective of the bank was not to tie LPA Group in an exclusive
arrangement for the software, but to encourage adoption across the industry.
that a widely adopted solution would be well supported and continue to evolve,
and thus outweighed any potential competitive advantage from being the sole
platform user. To survive and prosper,
banks need to head into their planning cycles with similar agile way to
approach product development. Moreover, that means finding an external partner
who can bring the ability to combine financial domain expertise with software
development skill and apply that to create a long-term beneficial solution.
Want to learn more? Book a demo with our post-trade team here
O’Brien is the Chief Product Officer of LPA