New research into transaction processing practices has found that a substantial number of private banks in Switzerland, the US and the UK lack back-office automation. The survey, carried out by Scorpio Partnership and commissioned by solutions provider Omgeo, shows that nearly 30% of private banks continue to manually operate trade execution, confirmation and affirmation, rather than processing trades electronically. Even among the remaining 70%, many still have a considerable amount of manual processes for some types of transactions.
In addition, only 39% of private banks have a post-trade/pre-settlement trade matching process in place. The remaining 61% rely mainly on settlement matching procedures. This means that a significant number of private banks are lacking basic automation in the post-trade/pre-settlement trade matching process therefore exposing themselves to unnecessary operational costs and risks. Recent estimates claim that by automating the post-trade environment operational costs can be reduced by up to 75%.
“This study highlights the urgent need for automation,” says Kevin Rideout, global head of relationship management, Omgeo. “Manual trade processing, such as faxes and phones causes unnecessary costs and risks that can be avoided by increasing the levels of STP in the post-trade environment,” he adds. Even within the largest banks that have high levels of automation, continues Rideout, there are still “certain areas where trade processing becomes fragmented.”
The research shows that this lack of automation is at its worst in Europe, with only 38% of Swiss participants and 22% of UK participants having a post-trade/pre-settlement matching process in place.