From the world of Luxembourg banking: five ways to improve your efficiency

in Industry Insights, 27.07.2016

We’ve recently been around the banking industry in Luxembourg collecting and compiling the latest edition of Banking Insights (available here). In the process we gleaned five ways to improve efficiency—here’s what Luxembourg’s bankers have been talking about:

1. Straight-through processing

Three decades ago, sales traders had to fill in colour-coded tickets (blue for buy, red for sell) and pass them to runners who had to decipher the quickly-scribbled orders and put them into the system. Imagine how straight-through processing, the digitalisation of that error-prone system, changed the way capital market and payment transactions happened.

Believe it or not, companies nowadays are still trolling their service processes and looking for places where automation could save time and human effort. It’s been estimated that more than 50% of a bank’s costs relate to staffing, and a significant part of that goes to people-processed customer transactions. Using a digital bridge to connect customer to result, or information from point A to point B, is one of the main places to gain space over your competition. It’s not a nice-to-have… it’s a need-to-survive.

2. Simplify… or outsource

Many financial institutions today are the younger incarnations of companies who, at one time or another, opted for a one-stop-shop model. Over time, some have built up large and complicated structures, and we’re witnessing many of them now trying to simplify things in order to remain agile. Products and services, legal and operating structures, operating platforms and systems, booking models—they can all become extremely complex, which can bog down a company.

We’re furthermore seeing a general shift towards hyper-specialisation, especially with FinTech on the rise and the pace of change having to be quick. Why waste time and effort on an internal solution when there’s a small company out there who does that one particular job to perfection? Many banks are still stepping gingerly around FinTechs, a little wary as to whether they’re friends or foes. “[Banks] don’t realise that most FinTech solutions are going to help them by making their jobs easier, not make them obsolete,” says Bert Boerman of Governance.io, recent winner of FinTech Startup of the Year in Luxembourg.

Mr Boerman says that even his company realised that another FinTech called FundRecs was providing a great solution for high-frequency reconciliation so he decided to team up with them. “It becomes like an ice cream cone for the client,” he explains. “They can have a scoop of Governance.io, a scoop of FundRecs, etc.—they can build their solutions entirely out of specialists.”

3. Customer autonomy

By giving customers more power and responsibility to carry out their own banking activities, there will be less need for human input from the bank. Of course, this isn’t as simple as just handing the reins over to customers—careful back-end planning, along with the appropriate IT capabilities, interfacing, and customer service need to accompany such an offering.

What it means in the big picture is a skills shift from those carrying out consumer transactions towards those helping to envision, build, maintain, and improve the IT engines powering new tools for consumers. It may take an investment but in the long run it could be a way to slim down. Just ask Virginie Lagrange, Chief Administrative Officer of Nomura Luxembourg: “In two years’ time job responsibilities will be different. Instead of inputting trades, our employees will focus on value-added controls. The bigger picture is that our bank is evolving.”

4. Technology for the long-term

Whereas straight-through-processing may help you boost efficiency to small degrees in different areas, another approach would be to throw off the towel and dive in head-first: as the digitalisation of banking is maturing a little bit, some institutions are feeling comfortable enough to make large-scale investments in their own IT capabilities. Nomura Luxembourg, for example, is in the middle of a huge upgrade to its core banking system and, in parallel, a project to centralise their master data and pricing data.

“The change began about two years ago when we decided to change our systems,” explains Ms Lagrange. “We previously used a lot of workarounds and EUCs, and implemented processes manually, especially for derivative-related instruments. We saw the potential to improve some of these shortcomings and to increase our overall efficiency.” She added that while efficiency is the short-term goal, it naturally goes hand in hand with higher revenues, which they’re looking for down the road. I.e., a competitive edge.

5. Customer service

Many banks currently have a centralised model, meaning that the vast majority of customer service transactions end up in central operations. Focusing on first-time resolution, i.e. resolving customer issues at the first point of contact with the customer, could be a vital improvement for some. Whether at a branch, or a contact centre, or via an instant messenger (or perhaps a chatbot), keeping customer service tickets away from central operations would be a kindness to your overall efficiency and perhaps to the customer as well.


Next up: artificial intelligence has arrived to the finance industry.


Or, read about the future of payments.


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