Why now is the time for a fresh approach towards FX technology at banks


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In an era where pundits like to predict doom and gloom for banks FX businesses, Integral’s Chief Revenue Officer Vikas Srivastava offers a different perspective that shows how a change in the approach towards technology can allow heads of FX desks to significantly increase their profits – even during the periods of low volatility.

We’re all aware that the size of the FX pie hasn’t been growing. The latest triennial survey by the BIS supports this sentiment, having flagged a decline in FX volumes for the first time in 15 years. After the slow-down in market activity amidst the spate of regulations that the FX market had to contend with it is quite likely that the worst may be behind us.

As we look to the future, there is real opportunity for heads of FX to take stock and consider adjustments to their technology strategy.

In a 2019 published paper by Integral it was identified upgrading technology can have a profound effect on the FX business – showing a reduction in costs by improving operational efficiency and increasing market share by competing more effectively.

For too long, banks have relied on legacy systems to manage their workflow, opening the potential for unnecessary complexity and the real-concern of exposure to technology and business risk. Ensuring the right tech stack is selected requires a fresh outlook if banks are to harbor hopes of capturing optimal flow when volatility returns.

Tech companies in Silicon Valley adopted a philosophy to only deploy ‘better, faster, cheaper’ cloud technology to increase market share and retain clients. Could this mindset, if it were to be embraced by the FX markets, have a similar effect on the trading desks and act as an enabler for growth?

Applying the Silicon Valley concept of ‘better, faster, cheaper’ cloud technology to FX certainly has its merits, here is why:

Better: Cloud based tech has the unique ability to deploy enhancements to the system for the benefit of all users. This cumulative wisdom from the broad swathes of the industry results in a more complete, comprehensive stack and high-performance functionality. Importantly, cloud systems are easily configurable, so the user can still deploy unique workflow and retain what they deem to be their ‘secret sauce’.

Cheaper: If you consider Total Cost of Ownership (TCO), cloud is a cheaper solution. The cost of technology is shared across the entire user-base and therefore leads to a significant reduction in operating costs for the equivalent functionality and service level if built and managed internally.

Faster: A clear benefit of a cloud environment is it’s faster to deploy, take to market across a bank’s operations – wherever the bank or their client’s need it – and quickly adapted in line with a fast-evolving market and the client’s own changing needs.

With more bank clients looking for services all around the world, the spoils will ultimately go to those who can improve cost efficiencies, manage operations intelligently and quickly expand their reach to optimally engage clients.

An increase in volatility will likely be like a rising tide, lifting our boats to a more buoyant position over time. Before that happens, and to ensure your boat is the nimblest, fastest and lightest, the possibilities of cloud brings opportunity to maximize profits and potential.


Market Insights from Integral

A bank’s ability to differentiate its FX offering is simultaneously becoming increasingly important and difficult. Integral’s 2019 report highlights how banks can successfully embark on their next FX technology upgrade to increase competitive advantage.

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