The banking and financial services industry currently
faces the dichotomy of improving their value proposition at a time when margin
pressures mean limited investment is available for new projects. Legacy
technologies can further hamper this. The market needs a model to integrate applications
and components to augment an infrastructure to support an increasingly dynamic
We can look to other industries for proof that the
strategic vendor relationships model can really work. Shining examples are the
automotive and aerospace industries. Both have at their pinnacle, globally
known brands. However, behind these are several tiers of critical partners,
some of whom produce small components that go to another vendor to incorporate
into a sub-assembly that then in turn goes to final manufacture. This has
allowed those industries to focus on their core business of selling cars or
aircraft allowing a cascade of quality, innovation etc. to a supplier partner
A similar evolutionary trajectory can been seen in the
banking industry. In this article, we draw some examples from a recent
collaboration between LPA and a major global investment bank.
collaboration and trust are key
project started from an existing LPA client seeing how the LPA Capmatix
platform could be leveraged for post-trade processes. The bank initiated joint
project to combine their market and post-trade process expertise with LPA’s
development capacity and understanding of financial technology. This emerged
organically from the bank’s operations team rather than coming from strategy or
The objective of the
project was not to build a custom solution but rather a fit-for-purpose product,
which would be adopted by the wider industry fitting into a bank’s architecture
as a complementary solution to replace individual modules or as a new
asset-agnostic central utility platform replacing existing silos.
The result is an
extension of LPA Group’s Capmatix product, a one-stop-shop solution with highly
configurable modules that is used for digitizing processes. The result 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
like many parts of a bank’s infrastructure do not directly provide measurable
revenue but are mission-critical functions. For post-trade, this means the
ability to efficiently and quickly process different asset classes such as derivatives.
the impact of the system will not be as simple as measuring the new customers
that sign up because of this new functionality. People do not decide where to
trade based on their bank’s post-trade system provider.
benefits were as follows;
- Reduced cost – The bank’s existing
infrastructure required licensing payments to multiple software providers. This
integrated system jointly developed with LPA removed that need, saving the firm
a significant amount of money over time.
efficiency – Greater efficiencies and agility enabled
employees to focus on client facing activities or other more value-adding
duties also reducing operational risk.
- Better client
service – The new streamlined process has;
less risk of error, less manual processes most of which are now automated, and
consolidated overlapping IT systems. This meant faster processing and fewer exceptions.
Internal and external clients noticed this!
- Faster time to
Creating and deploying a new common, low code infrastructure, the bank is reducing the time to bring products and
services to market boosting innovation in new features and products.
Building upon success
For the bank, this project is a test for broader
transformation in other areas. It is relatively simple and cost effective to
add support for additional functions or asset classes, multiplying the return
on investment. It also supports customer service, regulatory compliance and
security enhancements. This is a model for organisational agility and change
that can fit inside shrunken research and development budgets.
the new approach
Banks are increasingly realising that strategic,
trusted vendors will have their best interests at heart, supporting a more
agile, symbiotic future.
This Global Financial Crisis and subsequent waves of
regulatory requirements have compressed margins; adaptability is therefore a
key factor for survival. Innovation through partnership represents a promising
way to continue to meet the oncoming headwinds. Banks need their software technology
to work harder. This means going beyond data collection towards using
cloud-based artificial intelligence to detect patterns, produce reporting KPIs
and dashboards and guide continual improvements that may have been previously
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.
Foresight guided 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.
Keith O’Brien is the Chief Product Officer of LPA