essential for banking Business Process Outsourcing Driving efficiency and growth Avaloq enables banks and wealth managers to: Achieve operational excellence while differentiating on products and services Automate common processes to reduce costs and increase revenue Take advantage of direct and easy access to product suppliers at competitive pricing levels Focus core competencies on client satisfaction
Industry challenges The financial services industry is at a crossroads. Banks and wealth managers are plagued by inefficiencies throughout their day-to-day business processes and by the prevalence of outdated legacy systems, with the problem intensified by rapidly changing technologies. Global Banking Return on Equity (ROE) Pre-crisis 17% Global financial crisis 5% 7% New normal 10% 2007 2008 2009 2010 2011 2012 2013 2014 Source: McKinsey, Thomson Reuters 2014 Source: McKinsey, Thomson Reuters 2014 9% Profitability gap 8% 9% 10% Meanwhile, increasingly sophisticated and globally disperse clients are demanding more options as to how they communicate with their bank or wealth manager. The regulatory framework is also getting more complex, especially for those banks and wealth managers wishing to grow to a critical size globally while needing to adapt to local country-specific regulations. Although most banks and wealth managers have started to see their revenue grow again following the financial crisis, profitability has still not returned to pre-crisis margin levels. The pressure on costs is still very high and yet the financial industry needs to invest in modernising their IT platforms in order to stay competitive. Business Process Outsourcing (BPO) provides the banking and wealth management community with a flexible solution to the changing dynamisms of the market. Through the automation of common and non-differentiating processes, banks and wealth managers can reduce costs and increase revenues that are strained as a result of post-crisis regulatory pressures. Ultimately, by adopting a BPO solution, banks and wealth managers have the opportunity to concentrate on their core competencies and focus on what they do best: providing optimum client satisfaction on a local or global level. Since 2010, costs have increased in nearly every business function. Legal, compliance and risk management costs rose by 32 per cent, while asset and product management costs increased by 30 per cent in the same period. BCG Wealth Manager Performance Databases, 2011 2014 Avaloq s approach to closing the profitability gap New reality A paradigm shift in the banking industry of historical dimension Increasing regulatory and political pressure Increasingly complex and changing customer needs Changed market environment Difficult economic outlook Industrialisation Break up the value chain through BPO with a specialised provider High level of automation, a standardised solution and the volume to achieve economies of scale Improve efficiency, operational excellence and operating performance Benefit from continuous evolution and innovation with a specialised service provider Growth Secure competitiveness, position as leader and enable future growth BPO will free resources that can be reinvested in strengthening and differentiating the client facing core competencies Add value to the relationship with clients and further increase service quality Costs Revenues Costs Revenues Industrialisation of common and frequent processes enable banks to reduce costs and increase revenues that are strained as a result of post-crisis regulatory pressures. 2
Avaloq s BPO offering Avaloq offers a comprehensive set of managed services to support banks and wealth managers in achieving lower costs, increased efficiency and operational excellence throughout their organisation. Avaloq s managed services BPO ASP Business Process Outsourcing (BPO) Services with full business process and IT support where Avaloq has end-to-end responsibility. These services can be completely outsourced to the BPO centre and generally come with a high level of automation, with any manual interventions and exceptions handled by the BPO centre. Application Service Providing (ASP) ASP includes application management and IT operations. The BPO centre maintains and monitors the required applications and IT infrastructure, while business processes are owned and run by the bank or wealth manager. Business services Application management IT operations Avaloq s BPO offering along the banking value chain 1 Advisory 1 Advisory Avaloq provides functionality which enables banks and wealth managers to differentiate in the front and middle office. Application services are delivered for client digital channels, CRM and advisory and investment management. 2 Industrial operations 2 Industrial operations A full set of managed BPO and ASP services, covering the entire back office operation of a bank or wealth management organisation. This includes services from third parties, for example, output management, archiving and trading. 3 Street-side (Avaloq Business Network) The Avaloq Business Network enables financial service providers to offer their products and services, such as structured products and global custody, to banks and wealth managers through the Avaloq BPO platform. This distribution platform gives banks and wealth managers direct and easy access to products at pricing levels that individual customers would not be able to obtain. Managed services Business services Application management IT operations 3 Street-side (Avaloq Business Network) Industrialised operations Product brokerage Avaloq Banking Suite Global custody Structured products Payment and cards Funds network 3
Achieving operational excellence Avaloq s BPO offering provides banks and wealth managers with operational excellence while also giving them the freedom to differentiate products and services. Banks and wealth managers benefit from: A comprehensive set of services based on industry proven best practices Avaloq s full platform banking BPO covers a complete range of managed services Avaloq Banking Standards provide a standardised, localised solution which offers fast implementation and adaption to regulatory requirements An independent provider with tightly coupled software and service offerings Avaloq is the only independent provider for the financial industry to both develop and operate its own software in its BPO centres Avaloq s offerings of software and BPO services are tightly coupled so customers benefit from access to the latest software developments and a closed learning loop Front office innovation Avaloq allows banks and wealth managers to industrialise middle and back office activities so they can increase efficiency and free up valuable front office resources The BPO platform can be customised to enable a bank to individualise and differentiate its proposition in front office interactions with clients New services and products both bespoke and third party applications can be easily adapted, allowing the bank to continue to innovate, particularly in response to changing market conditions The migration of the operational platform and the outsourcing of support processes allow us to concentrate on our strengths and to free up resources for our core business: client advisory and investment management. A joined-up approach to managing regulatory changes Avaloq proactively manages and analyses new regulatory changes through market screening for all legislations that are relevant to its global customer base The whole Avaloq community is consulted at the early monitoring stage of a new regulation to jointly plan for and devise standardised regulatory solutions Ultimately banks and wealth managers remove the risk and cost of uncertainty, saving them valuable money, time and energy Short implementation and migration times Avaloq has a standardised implementation process and many years of experience in migration projects Avaloq is able to boast a 100% success rate in delivering BPO solutions to customers throughout the world The standardised approach of Avaloq brings banks live with their Avaloq implementation in 3 18 months Flexible access to differentiating financial product and market services Avaloq provides a market place for street-side partners to distribute their products at a competitive cost and to reach more clients globally Banks and wealth managers are given access to street-side suppliers and peripheral services 4 Marco Bizzozero, CEO Deutsche Bank (Switzerland) Ltd
Gaining competitive advantage Built on best practices of the leading global financial organisations, Avaloq s BPO offering helps banks and wealth managers to reduce operation and IT costs, maximising productivity and opening the door to cost-effective international expansion. Avaloq enables banks and wealth managers to: Decrease cost-income ratio Avaloq helps reduce overall costs, making banks more efficient and competitive. A surveyed selection of Avaloq customers in the Swiss private banking sector have their cost-income ratio 9% lower than their peers. Globally, cost-income ratio is only 60% for banks using Avaloq s BPO services, compared to 69% on average in the industry. Increase profit margins Avaloq supports banks and wealth managers in increasing their profits. The average gross profit margin of private banks using Avaloq in 2012 was 12bps above their peers. Maximise STP rates Avaloq customers following industry best practices process transactions at optimum straight-through processing (STP) rates, enabling them to increase client experience and brand loyalty, whilst decreasing operational costs. Innovate with lower costs and time to market Avaloq enables its customers to create and offer innovative products and solutions at a reduced cost with minimal time to market and distribution costs, supported by a large distribution channel within Avaloq s global community. Avaloq customers discover it is possible to maximise STP rates by up to 100%. Ensure a smooth and quick transition during M&As During the merger and aquisition process, the BPO centre manages infrastructure and operations, enabling time and resources to be freed for the business change. Meanwhile, Avaloq has the scale and expertise to effectively gather the financial data that needs to be aligned during a deal. Efficiency (STP rate) When is BPO the right solution? Areas High* Low Payments 99% 82% Securities 99% 86% Forex 100% 78% Money markets 100% 80% Derivatives 99% 70% Market events income 71% 68% Source: B-Source Banking Operation Statistics *High represents the average STP rate of the best performing banks Criteria Differentiation Costs benefits Geography BPO is right for... Banks and wealth managers that do not view their back office administration processes as a key differentiator. They want to blackbox their operations and focus on their own USPs Banks and wealth managers who want to reduce their operations costs and have a more predictable cost structure Organisations looking to expand globally for an affordable price (to locations where the BPO centre runs booking centres) We have access to a world-class, state-of-the-art solution at a fraction of the running costs involved in doing it ourselves. Simon Durrance, COO, NBAD Private Bank (Suisse) SA Risks Institutions that are keen to avoid the pressures of change management and prefer to outsource the implementation project 5
A Global Processing Network With the Avaloq BPO solution, banks and wealth managers benefit from becoming a member of Avaloq s Global Processing Network (GPN). The GPN includes established BPO centres in the major global financial centres and expansion plans are underway. Financial institutions gain flexibility and agility by accessing BPO services via the GPN. They benefit from the know-how of the local BPO centre, whilst also gaining access to processing and financial product and market services from the other connected centres. Avaloq s GPN provides the following benefits: Global back office processing With Avaloq s back office processing customers benefit from a lower transactional cost. Key to a transparent and global back office processing solution is a high degree of automation, reuse and a broad range of products being serviced. With the GPN in operation, tasks and issues can be distributed across different centres whilst remaining in full compliance with local regulators and data security. BPO application based on the Avaloq Banking Standards The Avaloq Banking Standards are a set of industry best practice processes, which are at the heart of the GPN architecture and the foundation of innovation within Avaloq s core business processes. These standards provide the starting point for customers Avaloq implementations. The BPO solution, which is built around the Avaloq Banking Suite, will enable us to continue offering our clients excellent service quality and state-of-theart services well into the future. Florian Marxer, Chairman of the Board of Managing Directors of Centrum 6
With the Avaloq Banking Suite, we rely on a modern and innovative processing platform and will be able to expand our own market presence. Karl Matthäus Schmidt, Chairman of the Board of Managing Directors of quirin bank A network of excellence and global governance Innovation among the BPO centres takes place through the Avaloq network of excellence; a global community of innovation. It provides one blueprint, the same setup, architecture and development methodology, so that innovation can be shared across the entire global community. New solutions developed locally are integrated into the Avaloq Banking Standards in a synchronised way. Avaloq applies its open group community rules and policies throughout its BPO centres, all the while adhering to strict global governance for software developments. Distribution platform for products and services Avaloq s distribution platform for products and services gives banks and wealth managers direct and easy access to product suppliers at competitive pricing levels negotiated exclusively by Avaloq, that individual customers would not typically be able to obtain. Customers also benefit from lower costs thanks to the automated processes between the distribution platform and the back office, as well as the fact that the interface is maintained by Avaloq rather than by the bank itself. 7
Award winning solutions Winner of best outsourcing solution The judges eye was caught by the winner s success based on listening to the needs of clients, markets and the regulators. Specific operational requirements unique to the client proposition are identified and discussed in the initial workshop. Leader in the Magic Quadrant for international retail core banking Avaloq leverages four primary sources of data gathering business process outsourcing (BPO), customers, partners, and others, such as universities to sharpen market insight. Best selling private banking solution for third consecutive year Avaloq had another impressive year, with a good haul of newname wins. While most of its largest projects are ongoing, the 2014 sales put it ahead of its rivals once more and included an interesting mix, from both a geographical and functional perspective. Contact Avaloq For more information please contact: E-mail: info@avaloq.com Telephone: +41 58 316 10 10 Find your local contact person at www.avaloq.com About Avaloq: Essential for Banking The Avaloq group is an international leader in integrated and comprehensive solutions for wealth management, universal and retail banks. It has a reputation for the highest standards in engineering excellence, is passionate about innovation and invests more in R&D than any other provider for the financial industry. The company s meticulous and uncompromising attention to detail has enabled it to achieve a unique 100% success rate in its implementation of banking solutions around the world. The entire Avaloq Banking Suite is consistently designed throughout and delivers unique business benefits to its users as well as strong technical performance. Avaloq is the only independent provider for the financial industry to both develop and operate its own software. Business process and IT outsourcing solutions are offered from Avaloq s BPO centres in Switzerland, Germany and Singapore. The company employs more than 1,800 highly qualified banking and IT specialists and has a global customer base of more than 140 financial institutions in over 20 countries worldwide, including tier one banks in the most demanding financial centres. Headquartered in Switzerland, Avaloq has branches in Berlin, Frankfurt, Geneva, Hong Kong, Leipzig, London, Luxembourg, Paris, Singapore, Sydney and Zurich. It has development centres in Zurich, Edinburgh and Manila. More information on www.avaloq.com www.avaloq.com