Financial institutions across the value chain, from custodians and brokers, right through to asset managers and asset owners, are feeling the squeeze on costs, as a lack of automation in core processes, shifting regulations, and fee compression take their toll.
This is all happening at a time when many firms are trying their best to weather the increasingly volatile market conditions. A thoughtful approach to workflow management could mitigate some of these problems, allowing firms to concentrate more on revenue generation, client retention and acquisition, and innovation.
Manual processes and inefficient workflows weigh the industry down
Operating costs at financial institutions are going up, and have been for some time. One of the root causes of this is the industry’s ongoing reliance on manual processing.
“A lot of organisations are not ‘all in’ with automation. There is a natural reaction in our industry to plug gaps in the system by hiring more people, so the costs per trade are relatively high. Irrespective of whether you are in a primary, secondary or tertiary location, we are still seeing a lot of operational processes being carried out in a bespoke fashion by the various humans in the loop,” says Helen Adair, Chief Product Officer, Taskize.
Whilst doubling down on headcount as operations scale will typically lead to bigger outgoings, offshoring – widely seen in the industry as an efficiency play – can sometimes be a false economy.
“Offshoring is not always effective. If financial institutions are outsourcing broken processes to multiple or cheaper locations, the pain-points are not being solved, and will get worse over time, creating further friction,” notes James Pike, Chief Revenue Officer and Head of Strategy, Taskize.
Pike continues: “Historically, all of the key teams at financial institutions were located in one or two locations. As operations spread out across the globe, there was less connectivity between the core teams. With volumes mushrooming and operational processes becoming more complex, this dispersion means it has become much harder to solve business issues, resulting in enterprise-wide inefficiencies.”
These problems are further compounded by the industry’s lack of investment into workflow solutions, continued use of email, and siloed systems, which Pike argues is leading to data and information fragmentation, and ultimately extra costs.
Take client onboardings, for instance, an activity that is saddled with intermediation and legacy technology. “Client onboardings can often be logistically complex, not least because of the sheer volume of email traffic being exchanged in the run-up to an onboarding. Right now, six or seven different participants in the chain will communicate with each other when carrying out an onboard, and it is often performed across multiple locations and systems,” comments Adair.
This can lead to errors, such as missing Know-Your-Customer (KYC) data or inaccurate counterparty information, resulting in delays to onboardings and even problems during the actual trading process, all of which add significant basis points (bps) to the cost of doing business.
The industry’s dependency on antiquated technology and the absence of proper workflow solutions requires urgent fixing.
Regulations pile on the pressure yet further
Compliance with regulations, whether it is the Basel capital adequacy requirements or the upcoming US Treasury Cash and Repo clearing rules, is another drain on company resources, according to Adair.
However, nothing compares with the global transition to T+1 settlements. Swift is betting that 70% of global trading volumes will be settling on T+1, or faster, by 2030, a sharp jump from today where that figure is closer to 35%.
Such is the scale of T+1, a study by Citi Securities Services found that 76% of financial institutions worldwide are working on some kind of T+1 project, whilst 41% described the rollout of shorter settlement cycles as being the most impactful market change, up from 32% in 2024.
T+1 may be live in North America, but its rollout in Europe – expected in October 2027 – is likely to be more protracted, multi-faceted and expensive, owing to the number of markets involved. While preparing for T+1 in Europe is tough, the cost of doing nothing will be comparatively worse, as settlement indiscipline at firms will be punished under the EU’s Central Securities Depositories Regulation (CSDR).
Penalties for settlement indiscipline in the current T+2 ecosystem are pretty steep. According to Target2Securities (T2S) data, monthly cash penalties for late matching and settlement fails on the T2S platform averaged $70.43 million, and this is only going to get worse in a T+1 ecosystem as firms will have even less time to complete their post-trade processing activities , a problem that risks being brutally exposed if the industry’s preparations are not up to scratch.
Just as their operating and regulatory costs keep trending upwards, financial institutions, including custodians, brokers, and asset managers, are also facing intense scrutiny over fees. A recent PwC report, for example, reported that almost 3/5ths of institutional investors said they would replace an asset manager based on cost grounds alone.
The increasing compliance burden and the relentless client pressure on fees are making life incredibly difficult for financial institutions.
How can workflow tools turn things around?
The industry is going through a rough cost patch, but there are plenty of ways for financial institutions to realise operational synergies.
Engaging with a quality service provider is a good starting point. Taskize has a well-trodden track record of delivering better automation at firms, allowing businesses to replace email and manual workflows with something more seamless. Not only does this expedite operational processes and reduce the chances of human errors, but it can unlock savings too.
“Taskize’s solution ensures that audit trails, digital records and stamps, and information points are all stored in one central place, thereby creating a clean interface for users. Instead of having multiple touchpoints, the workflow tool improves processing efficiency. Not only are tasks being assigned correctly on the first attempt, but first response times are falling too, and it is taking less time for the relevant parties to complete tasks,” explains Adair.
Taskize also provides users with greater visibility into their workflow management.
“Firms can use Taskize to identify if there are common problems causing, say, breaks with different clients. A piece of bad data might be causing thousands of trade breaks, which could be impacting multiple clients. These common issues are sometimes difficult to spot if people are working in silos. However, Taskize can help firms identify these issues quickly,” highlights Pike.
This added layer of transparency allows people to not only spot problems earlier, but enables them to streamline their operations across both location and strategy.
“Taskize brings operational capacity generation. The tool helps firm manage their resources and creates scale and capacity that current legacy systems may not facilitate,” explains Pike.
Analysis by Euroclear underlines the extent of the efficiency benefits of working with Taskize.
Since using Taskize, 80% of Euroclear’s clients said their queries are either being acknowledged or answered within 10 minutes, whilst tier 1 organisations said 65% of their queries are normally resolved in two hours or faster. Overall, 98% of clients told Euroclear they are happy with the Taskize service.
Taskize’s platform is – among other things – helping financial institutions move away from manual processing and making for an easier T+1 transition. By removing some of the operational pain-points at firms, costs can be better contained and resources freed up to focus on more critical matters, like attracting new business or driving forward with product innovation.