Survey highlights the high price paid by banks for lack of transparency into their trade expenses
Global investment banks are spending vast sums each year on their brokerage fees and billing operations but data challenges, lack of automation and legacy technology make it difficult to fully understand and therefore optimise their spend across the organisation.
According to an independent survey(1) conducted by Meritsoft, a Cognizant company and leading innovator in the field of post-trade process automation, these issues are impacting capital allocation, profitability and client relationships.(1)
Key findings highlighted in the report include:
– 88% say trade expense is a top three annual cost, with 80% of respondents paying between $250m and $1bn in 2020
– 78% cite a lack of a central data repository & 77% cite outdated rate agreements and counterparty referential data as key issues impacting operational processes
– 54% say trade expense costs and challenges have affected decisions on capital allocation, and for 45% trading profits have been reduced
– While 65% state that investment to improve their trade expense management operations is one of the firm’s top priorities, only 24% have budgets in place
A lack of firm-wide visibility into brokerage, custodian, exchange and clearing expenses is the result of under-investment in post-trade processes, which in turn means banks do not have a centralised view of relevant data and struggle to optimise this key area of operations. Significantly, with the survey revealing the impact from back office to front office, this is a key issue for senior decision makers.
Daniel Carpenter, Commercial Lead at Meritsoft, a Cognizant company:
“The challenges with trade expense management are well known in the industry. Despite awareness, many banks are yet to invest in solutions that bring greater visibility of their trade related costs. With bank operations becoming increasingly complex, through globalisation, consolidation and new asset class activity, this problem is in danger of spiralling out of control.”
“Buy-in from senior decision makers is needed to invest in data digitisation, automation and new platforms and services that allow financial institutions to get to grips with their transaction-related fees and enable cost optimisation across the business. Our findings provide a compelling business case for board members to invest in solutions that shine a light on this costly and opaque area of the trade lifecycle.”
