Data Analytics – a Core Element of Settlement Business Analysis

You have been working at Vontobel as a Business Analyst for four years. How has your work changed during this time?

I worked as a Business Analyst in the Settlement Services team for the majority of my first two years here. I was responsible for providing expert business analysis, but was also directly involved in day-to-day business. It wasn’t always easy to balance daily operations and business analysis, especially at the start of the COVID-19 pandemic and with the high trade and settlement volumes it caused. At the time, my main focus was on stabilizing our day-to-day business rather than thinking about what enhancements we might make.

For a good two years now, I have been one of three Business Analysts in the Processing Development team. Now that I have taken a step back from our day-to-day business, I can implement ideas for optimization and efforts to enhance automation much more efficiently, profitably, and thus sustainably.

As a Business Analyst in the Processing Development team, you mainly act as an interface between our various departments and the Avaloq IT team. How does this triangle work?

It might not strike you as the most efficient way to do things at first glance. In fact, direct communication between our specialist departments and the Avaloq IT team will often see both speaking at cross-purposes, as each will have their own perspectives and expectations. It’s a language barrier of sorts, and it can lead to incorrect developments or misinterpretations, which waste a lot of time and money. It can also be a persistent damper on motivation in our departments and Avaloq IT.

As a Business Analyst, I speak the same language as our specialists, and I can discuss matters with the parameterizers of Avaloq, which minimizes the risks mentioned above and creates added value in the short and long term.

Effective end of 2019, the Advanced Settlement Service (ASCS) cooperation with SIX SIS was terminated. Since then, Vontobel has been processing trade settlements (delivery versus payment) on its own again. How have things developed in this area in the years after go-live?

Things have been going very well, in terms of volume, the level of automation (the STP rate), and the rate of late settlements (fail rate) over the last four years. In 2019, we had a volume of 3.6 million settlements, with an STP rate of 97.52 percent and a fail rate of 1.5 percent; in 2022, we had 5.8 million settlements (+61 percent), with an STP rate of 99.04 percent (+1.52 percent) and a fail rate of 0.99 percent (–0.51 percent).

The record volume we saw in 2020 when the pandemic hit, with almost 6.7 million settlements at a rather low STP rate of just 96.73 percent, was a big part of this positive development.

What was the deciding factor in this positive development in the STP rate?

When we saw that record volume in 2020, we started analyzing our data. To do that, we needed the relevant transaction details behind those figures. After all, there are plenty of disruptive factors in a settlement that can require manual intervention on the part of an employee.

The most well-known disruptive factors are:

• trade details (fees, taxes, prices, etc.);
• master data (standing settlement instructions / asset data / market data);
• counterparties (not recognizing a trade / not submitting counter instructions / having the wrong standing instructions / being short).

By analyzing the data from the transaction details, we were able to determine that one of the main reasons for the low STP rate was that counterparty standing settlement instructions were not being maintained in our system. Once we had made the necessary corrections, our STP rate increased by nearly 1 percent (approximately 60,000 transactions a year) in just a few months, which laid the foundations for further adjustments and analyses.

In the meantime, we have simplified the way we evaluate transaction details in our settlement business. Our data analytics dashboard, for example, allows us to visualize data and automate our processes, so we can do more to ensure high levels of quality in settlement and, above all, optimize our business in the long term.

How do you visualize transaction data in a settlement context?

The transaction details from our core banking system are extracted and correlated on a settlement dashboard using a data analytics tool. The dashboard is updated almost in real time, and employees can access it via web browser. You can display and combine almost all settlement transaction details. We can go back to the start of the year or even further and call up the most important KPIs, for example the STP rate, the fail rate, or volume, down to the smallest detail (at transaction level). The development of KPIs over time and trends are also displayed.

Processes that previously ran in the background via our core banking system can now be brought to the forefront using the dashboard – with just a few clicks, we can see or calculate what is happening, and why.

Sustainability is a hot topic right now: How do your updates and optimizations in Processing Development contribute to sustainability?

You have to bear in mind that every optimization requiring a system update, no matter how small, will incur a fee from Avaloq IT and will not be implemented until the next release at least (every one or two months). That’s why I prioritize the following in my work:

1. Making sure I have a detailed understanding of what our departments need.
2. Checking whether requirements can be addressed using functions that have already been implemented or are currently in use, avoiding the need for a new release.
3. Implementing requirements with detailed specifications.

In terms of implementation, the second point (reusing previously implemented functions) is an important part of my job. I also try to include potential future requirements in the implementation phase, to ensure the greatest degree of flexibility possible.

How do Transaction Banking clients benefit from these developments and optimizations?

As a Business Analyst, I’m involved in developments and optimizations that have a direct impact on our clients at every stage, from uptake to implementation of requirements. Our clients enjoy tailored, flexible solutions and the highest level of professional and technical expertise throughout the implementation process.

Developments and optimizations that do not have a direct impact on clients still improve the efficiency of employees in our departments, which has a positive knock-on effect in terms of the quality of our services and costs – ultimately also benefiting our Transaction Banking clients. In my work, I have to be aware that every development and optimization will have an impact on the client experience for our Transaction Banking clients, whether direct or indirect.

What changes has the settlement sector seen in recent years, and what challenges lie ahead?

Attempts at harmonization (T2S) and regulatory requirements (CSDR) have had a significant impact on settlements in recent years.

The requirements of Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (CSDR) saw considerable efforts made across Europe in 2022 to increase settlement efficiency among all market participants. Whether this will succeed in the long run remains to be seen. However, this regulation has made it possible to evaluate market participants’ settlement processes and to reward or punish them with penalties accordingly. Vontobel’s settlement processes are in good shape in this regard, and our specialist departments actively monitor all open settlements.

In the next few years, issues such as ISO 20022 (which will replace the ISO 15020 standard), the expansion of partial (automated) settlements in the Swiss market, and the global push for even shorter settlement cycles (T+1 to T+0, and thus instant settlements) will pose major procedural challenges to the settlement sector.

I actively represent the Bank in the corresponding working groups of the Swiss financial center, and I’m convinced we are well positioned to meet these challenges head-on.

What is your key takeaway for clients in Transaction Banking?

We want to enable and ensure the best-possible client experience for our Transaction Banking clients. Our aim is always to act rather than react and maintain our position as a reliable partner. By taking on the role of Business Analyst in the Processing Development team, as part of the Processing Management department, we are now in a position to make an active contribution with our own innovations.