Banks in Asia look to outsourcing to facilitate EM expansion: Avaloq
Despite some ongoing trepidation, banks in Asia are increasingly warming to SaaS and BPaaS offerings, particularly when entering new markets given the time-to-market and cost benefits, according to Pascal Föhn, Avaloq group COO, who spoke to Asian Private Banker on the sidelines of the Avaloq Community Conference held in Singapore today.
“We have interest from both new customers who still operate on-prem[ises] and are thinking to migrate to the cloud as well as existing customers who are aiming to get fast market entry in new locations,” said Föhn.
“As banks’ appetite increases in penetrating emerging markets such as Malaysia, Indonesia, Thailand, and the Philippines, we do let banks choose to build their infrastructure on-prem, SaaS or via BPaaS.”
He added that although Asia is a predominantly on-premises market, demand for BPaaS has just reached the tipping point in a hockey-stick-like incline, heading for quick growth “due to the obvious benefits of scalability and cost”. Accordingly, Avaloq is prioritising its BPaaS offering in the mid-term.
Föhn also noted that the Swiss firm's BPaaS solution differs from BPO services as the latter tends to shift back-office processes to cheaper labour markets, while Avaloq views the back office as a commodity that should be automated.
“Don’t we all dream of a human-free back office?” said Föhn. “Our BPaaS centre is located where our customers are in Singapore, [which is] not a low-cost location.”
Currently, Avaloq provides BPaaS solutions to some of the first wave of early adopters, including Deutsche Bank Wealth Management, which also presented at the community conference today.
Despite there being “obvious” benefits to outsourcing, private banks in Asia are still divided over third-party vendors, predominantly owing to security and control risks. Föhn acknowledged their concerns as being “the case with new technology and new processes”.
He suggested banks adopt an evolution model to technology development, rather than simply replacing legacy systems and calling it a day, as new offerings — some of which are offered by fintechs on the avaloq.one platform — will give banks the opportunity to explore innovative solutions at low-integration costs.
“Evolving towards an open platform, adding microservices and open APIs will allow banks to get more added value from their investments and fintechs,” explained Föhn.
Looking forward, Avaloq is expanding its product and service offering, as well as continuing to cement its footprint in the region.
In the first half of 2020, Avaloq will launch two new platforms: wealth management and engagement, targeting both relationship managers and end-clients.
“We’re looking forward to launching the wealth management and engagement platforms in Asia because the region is very advanced in utilising digital and social platforms for advisory and services,” said Föhn. “These platforms are actually the two solutions that our clients have requested the most.”
The group is also eyeing further inorganic growth, having already invested in cryptocurrency management solution METACO and structured products data provider Derivative Partners. Both deals were made in Switzerland, but Avaloq has not ruled out Asia as an acquisition hunting ground.
“We currently have sufficient cash at hand (year-end 2018 in excess of CHF 144 million), so don’t be surprised if you see more M&A activity in the next 12-18 months,” hinted Föhn.
Regionally, the firm has also strengthened its team with the appointment of Imad Abou Haidar as Asia head and Pradipta Satapathy as head of services. Satapathy joins with over 12 years of experience in banking-related technology, having worked for OCBC Bank and Credit Suisse in the past.
During the first half of 2019, the tech firm raked in CHF 288 million in profits according to its 1H results released yesterday, representing 5% YoY growth.
