A new approach to a traditional business
18 Sep 2019
Commerzbank’s Rob Scott argues that the evolving relationship focus of institutional clients—be that banks or non banks—requires a change of tact
Image: Shutterstock
The post-trade business is markedly different compared to years gone by. While it still necessitates that banks maintain regulatory robustness and become ever more cost-efficient, there is a greater demand for more personable client relationships, supplemented with state-of-the-art technologies.
Delivering in this new environment is no easy feat: it requires new thinking and approaches to how we as banks govern our client interactions. In this new and increasingly complex environment, digital services, though critical, are only one part of the equation; after all banking remains a business founded on human relationships and trust. So, what exactly has changed?
Changing business
It’s simple: banking is no longer product-driven. Gone are the days when a client has a dozen contacts at the correspondent banking partner—each offering an individual service or product with no joined-up thinking.
Banks are instead favouring relationships that can better guarantee the exchange of expertise and more integrated thinking. For instance, financial institution clients are not looking for singular custody and clearing products, or isolated products and services that address one part of the value-chain. Instead, they require a more rounded and considered, strategic dialogue in order to solve business challenges front-to-back.
As we move towards becoming digital enterprises, clients’ expectations are also changing in line with their own personal digital journeys. As individuals, we are increasingly becoming accustomed to real-time, instant information at the touch of a button or keystroke. The information we access on our personal devices isn’t limited by boundaries or geographies, but rather brings together multiple sources, activities and applications. As banks, it is our role to bring pan-bank solutions together for the clients.
We can no longer operate with a singular product approach to their client relationships.
Win by excellence
This is why, as a bank, we are doing things differently. For many years, we have made the client central to how we measure success. But, to build upon this, we have now brought together a senior relationship and banking solutions team under “institutionals”, whose purpose is to drive a more strategic agenda with the client. We deliver this to the client through one point of contact—a dedicated relationship manager.
These managers have deep industry knowledge and understanding of all of the banks’ products and services, and are fully aligned to achieving the client’s business objectives: from ensuring regulatory processes are watertight, reducing costs, or even assisting in the expansion of a regional client’s international presence. In short, the relationship manager “delivers the bank to the client”.
In practice, the relationship manager’s role is to have an open dialogue regarding their specific operational and logistical challenges. Through developing a holistic understanding of the client’s business, the relationship manager acts as a client ambassador within the bank—representing the client’s requirements through careful and considered liaison with the various internal products groups and stakeholders. Importantly, the relationship manager is product-agnostic: their primary role is to only match solutions specific to the client’s needs. This approach, of course, necessitates a different mindset. The relationship manager must gain an even fuller appreciation of: the client’s front-to-back processes; how technologies can bring about efficiency-savings, an enhanced service or better connectivity; the clients’ risks and resource consumption. They must also ensure that core investments are sustainable and contribute to the future proofing of the client’s business activities.
The net-benefits of developing this bigger picture, though, are clear: we can connect the client to our technological capabilities in a more streamlined, efficient and holistic way—allowing them to achieve superior commercial outcomes and optimise their interactions with us.
Strategic partnerships
This holistic approach to our client also enforces collaboration with third-parties. For example, even if a client executes via another banks trading desk but wishes for us to handle all post-trade activities. Thanks to open-banking principles and application programming interfaces (APIs), our technological capabilities can allow that to happen seamlessly via a single portal.
In securities services, for example, Commerzbank recently entered into a strategic partnership with HSBC Transaction Services GmbH through which our securities settlement business processes are now transferred to a joint venture, with operations scheduled to begin early next year. The partnership, which allows us to leverage our expertise and HSBC’s state-of-the-art domestic securities platform, compliments our wider commitment to simplify and improve processes, while also reducing costs and improving the client experience.
New technologies
The new way of working isn’t only underpinned by collaboration with fellow banks; we are also partnering with technology providers to leverage robotic process automation (RPA). We are engaged in a pilot scheme using artificial intelligence (AI) solutions to automate mundane and predictable data processes, thus leading to time efficiencies.
The end result means we can devote more human capacity to our clients, with our energies redeployed to providing meaningful client interaction at the beginning of the working day. Again, ensuring that we are better connected to our clients and allowing for more dedicated and focused time solving or assisting with their day-to-day problems.
For many years, the industry has not been able to deliver a clear view of an organisation’s cash positions in real-time, nor has it given transaction data detailing the status of the underlying transaction (whether the transaction has matched, settled, is insufficient or failed).
In part, this is due to the array of legacy platforms and the complexity of bringing all of these platforms together via a single view. At Commerzbank we are working on building and creating transparent client dashboards which enable clients to manage their business in a more commercial manner, optimising and mobilising their liquidity needs across the globe.
In essence, our goal is to ensure that the “institutional experience” mirrors what’s already available in many aspects of the client’s retail banking experience, whereby the status of all transactions are clearly visible in real time.
Innovation
We work closely with the group’s research and development unit, main-incubator, to look for ways to bring emerging technologies to life—and help us to simplify client processes, as well as reduce complexities and costs in attaining digitalised connectivity and service deliveries. We are exploring how blockchain technology can be used for the issuance of commercial paper, and several pilots delivered in partnership have demonstrated that this process can now take mere minutes, rather than days—representing a major step towards fully blockchain-based securities trading.
In addition, we have run successful pilots of our own with tokenised assets—and have examined how securities and cash can be mobilised together on the same blockchain.
We are also looking at big data and advanced analytics in using processes to identify patterns of behaviour or correlating data which, in turn, can enable us to provide optimised products and services at the right time to our clients.
The future
Certainly, with technological advancement progressing at such an exponential rate of change, your service partner must understand what is technologically possible and make the necessary investments to deliver on the new expectations in post-trade. It is therefore imperative that banking partners create an environment in which clients can freely operate, interact, communicate and have at their disposal tools to help them make better business decisions. Despite the change, the fundamentals remain the same: a service partner must deliver on this while mobilising and safe-keeping client assets around the globe in a safe, seamless and transparent manner.
The post-trade business, though in many ways steeped in tradition, is fast evolving. In my view, the next five years promise to be very transformative as new technologies mature and become increasingly accepted by multiple market infrastructures, service providers and of course, clients that connect to them.
Delivering in this new environment is no easy feat: it requires new thinking and approaches to how we as banks govern our client interactions. In this new and increasingly complex environment, digital services, though critical, are only one part of the equation; after all banking remains a business founded on human relationships and trust. So, what exactly has changed?
Changing business
It’s simple: banking is no longer product-driven. Gone are the days when a client has a dozen contacts at the correspondent banking partner—each offering an individual service or product with no joined-up thinking.
Banks are instead favouring relationships that can better guarantee the exchange of expertise and more integrated thinking. For instance, financial institution clients are not looking for singular custody and clearing products, or isolated products and services that address one part of the value-chain. Instead, they require a more rounded and considered, strategic dialogue in order to solve business challenges front-to-back.
As we move towards becoming digital enterprises, clients’ expectations are also changing in line with their own personal digital journeys. As individuals, we are increasingly becoming accustomed to real-time, instant information at the touch of a button or keystroke. The information we access on our personal devices isn’t limited by boundaries or geographies, but rather brings together multiple sources, activities and applications. As banks, it is our role to bring pan-bank solutions together for the clients.
We can no longer operate with a singular product approach to their client relationships.
Win by excellence
This is why, as a bank, we are doing things differently. For many years, we have made the client central to how we measure success. But, to build upon this, we have now brought together a senior relationship and banking solutions team under “institutionals”, whose purpose is to drive a more strategic agenda with the client. We deliver this to the client through one point of contact—a dedicated relationship manager.
These managers have deep industry knowledge and understanding of all of the banks’ products and services, and are fully aligned to achieving the client’s business objectives: from ensuring regulatory processes are watertight, reducing costs, or even assisting in the expansion of a regional client’s international presence. In short, the relationship manager “delivers the bank to the client”.
In practice, the relationship manager’s role is to have an open dialogue regarding their specific operational and logistical challenges. Through developing a holistic understanding of the client’s business, the relationship manager acts as a client ambassador within the bank—representing the client’s requirements through careful and considered liaison with the various internal products groups and stakeholders. Importantly, the relationship manager is product-agnostic: their primary role is to only match solutions specific to the client’s needs. This approach, of course, necessitates a different mindset. The relationship manager must gain an even fuller appreciation of: the client’s front-to-back processes; how technologies can bring about efficiency-savings, an enhanced service or better connectivity; the clients’ risks and resource consumption. They must also ensure that core investments are sustainable and contribute to the future proofing of the client’s business activities.
The net-benefits of developing this bigger picture, though, are clear: we can connect the client to our technological capabilities in a more streamlined, efficient and holistic way—allowing them to achieve superior commercial outcomes and optimise their interactions with us.
Strategic partnerships
This holistic approach to our client also enforces collaboration with third-parties. For example, even if a client executes via another banks trading desk but wishes for us to handle all post-trade activities. Thanks to open-banking principles and application programming interfaces (APIs), our technological capabilities can allow that to happen seamlessly via a single portal.
In securities services, for example, Commerzbank recently entered into a strategic partnership with HSBC Transaction Services GmbH through which our securities settlement business processes are now transferred to a joint venture, with operations scheduled to begin early next year. The partnership, which allows us to leverage our expertise and HSBC’s state-of-the-art domestic securities platform, compliments our wider commitment to simplify and improve processes, while also reducing costs and improving the client experience.
New technologies
The new way of working isn’t only underpinned by collaboration with fellow banks; we are also partnering with technology providers to leverage robotic process automation (RPA). We are engaged in a pilot scheme using artificial intelligence (AI) solutions to automate mundane and predictable data processes, thus leading to time efficiencies.
The end result means we can devote more human capacity to our clients, with our energies redeployed to providing meaningful client interaction at the beginning of the working day. Again, ensuring that we are better connected to our clients and allowing for more dedicated and focused time solving or assisting with their day-to-day problems.
For many years, the industry has not been able to deliver a clear view of an organisation’s cash positions in real-time, nor has it given transaction data detailing the status of the underlying transaction (whether the transaction has matched, settled, is insufficient or failed).
In part, this is due to the array of legacy platforms and the complexity of bringing all of these platforms together via a single view. At Commerzbank we are working on building and creating transparent client dashboards which enable clients to manage their business in a more commercial manner, optimising and mobilising their liquidity needs across the globe.
In essence, our goal is to ensure that the “institutional experience” mirrors what’s already available in many aspects of the client’s retail banking experience, whereby the status of all transactions are clearly visible in real time.
Innovation
We work closely with the group’s research and development unit, main-incubator, to look for ways to bring emerging technologies to life—and help us to simplify client processes, as well as reduce complexities and costs in attaining digitalised connectivity and service deliveries. We are exploring how blockchain technology can be used for the issuance of commercial paper, and several pilots delivered in partnership have demonstrated that this process can now take mere minutes, rather than days—representing a major step towards fully blockchain-based securities trading.
In addition, we have run successful pilots of our own with tokenised assets—and have examined how securities and cash can be mobilised together on the same blockchain.
We are also looking at big data and advanced analytics in using processes to identify patterns of behaviour or correlating data which, in turn, can enable us to provide optimised products and services at the right time to our clients.
The future
Certainly, with technological advancement progressing at such an exponential rate of change, your service partner must understand what is technologically possible and make the necessary investments to deliver on the new expectations in post-trade. It is therefore imperative that banking partners create an environment in which clients can freely operate, interact, communicate and have at their disposal tools to help them make better business decisions. Despite the change, the fundamentals remain the same: a service partner must deliver on this while mobilising and safe-keeping client assets around the globe in a safe, seamless and transparent manner.
The post-trade business, though in many ways steeped in tradition, is fast evolving. In my view, the next five years promise to be very transformative as new technologies mature and become increasingly accepted by multiple market infrastructures, service providers and of course, clients that connect to them.
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