Financial services
Interview:
Pim van der Horst on straight-through processing
24 April 2008
Conny Dorrestijn found out how securities and investment bank KAS Bank is embracing Windows as a platform for operational excellence.
Based in Amsterdam since 1915, KAS Bank supplies international institutional investors such as pension funds and insurance companies, and financial institutions (banks, brokers and securities traders) with investment management and custody, clearing and settlement services. KAS Bank recently strength - ened its focus on wholesale banking by selling its private banking business to Nachenius. In a playing field where a few giants seem to dominate the game, KAS Bank flourishes because of, rather than despite its size. “Our main focus is to deliver tailor-made solutions to our clients, we do not believe in a ‘onesize- fits-all’ approach,” says Nico Blom, of the KAS Bank management board. “We have account managers dedicated to our clients, who can facilitate a healthy dialogue with our specialists on how to construct the optimal service portfolio. This is truly a unique selling point in our world. Also, we know and understand our playing field and can offer clients direct connectivity to virtually all European markets. In today’s climate with increasing compliance issues – just think about the impact of the Markets in Financial Instruments Directive (MiFID) on foreign institutions wishing to trade and settle in Europe – we can offer a truly innovative alternative.”
This focus on the client could, however, become a mousetrap if it not supported by a flawless back office – although that terminology is more or less out of date in an environment where straight-through processing (STP) connects back, middle and front office in a joint effort to deliver the promise to the customer. A core IBM mainframe sat at the heart of operations for many years, but changing market conditions forced KAS Bank to take a fresh look at its systems environment. The costs per seat were high and time-to-market in reaction to changing requirements was also considered too long. New technology also offered new opportunities: lower cost per seat, and a business services-based approach which offers scalability and flexibility – key to KAS Bank’s ability to swiftly respond to client demand. New technology meant that old prejudices could be swept aside, and so a new project and a new approach were defined and various parties invited to tender. Key parameters included optimal connectivity with customers, high transaction volume guarantees supported by thorough benchmarks, and working around the capacity issue to identify which type of resources and skills are relatively readily available.
CIO Pim van der Horst is responsible for running a faultless and continuous IT platform in a futureproof environment. “Having studied various cases we took a serious look at Windows-based technology,” he explains. “The total cost of ownership (TCO) was good, if not very good and the performance indicators were equal or better. The time to develop new functionality in .NET is also shorter than in any other environment. Moreover, our drive for innova - tion was primarily hampered by available (internal) capacity, so attracting ambitious IT staff is key – .NET developers are simply more readily available than Adabas/Naturalsay Oracle specialists. Technology without hands and brains has no value to us. Our new environment is a layered approach of a core Windows-based platform surrounded by tools and best-of-breed functional software. These all have to fit within one core architecture, but this might be a mix of existing migrated software, or newly developed services (SOA), or readily available packages. We have started a process of managed migration towards this new platform, called the Fund-IT (‘fundament’ under IT) project and we are now in the building/migration stage with the aim of completion by 2010.”
“We were delighted to work with KAS Bank on this project and definitely ready to match our technology and services with the more traditional choices in finance”, says Freek Oldenhuis Arwert, the Microsoft business manager working alongside the KAS Bank team. “We had to prove beyond any level of doubt that our Windows platform was reliable, robust and flexible enough to guarantee an ‘always-on’ environment and high transaction volumes. A considerable number of business cases, benchmarks, workshops, visits and studies later we were selected to embark on this ambitious project with KAS Bank. At the same time, the call for connectivity meant that we could offer a Swift Messaging service through our BizTalk Swift adapter. KAS Bank is among the top 100 largest Swift-users and more than 95 per cent of its transaction messages are now handled over the Swift network, which creates enormous business benefit for both KAS Bank and its customers.”
“Besides being best-of-breed in IT, there are good business reasons, such as a number of market developments on a global and European level, for wanting to be a front runner,” adds Blom. “MiFID for one creates a lot of opportunity for an institution like ours. The liquidity is currently moving around a number of European exchanges, and new ones (multilateral trading facilities or MTFs) will arise. Volumes will most likely go up if you look at demographic factors such as an ageing population and increased assets under management. MiFID will create a more transparent market, which in turn will attract foreign investments. Our European platform is the backbone of our business and with that we can connect new countries, exchanges and MTFs within 150 man-hours to guarantee a post-trade process which matches the trade cycle in terms of efficiency and speed. In operational terms – and this is driven by client demand – this means less manual input, no double input, a higher degree of connectivity with our customers and their systems, a real-time environment and, within the very near future, 24-hour service levels. Our people, our processes and our systems need to be prepared for that.”
Blom continues: “We also see a lot of develop - ments and opportunities in ‘insourcing’; we supply back-office services to a number of US and European companies for whom the burden of compliance and IT investments becomes overwhelming. When we offer best execution and best price in a transparent environment, we enable our clients in turn to focus on what they do best. We at KAS Bank are a facilitator; we take no position and therefore we are an excellent and – moreover – neutral, non-competitive business partner.”
So how is the project progressing – what about the non-tangibles that so often dictate the defining line between success and failure? “This is by no means an ‘IT-party’. This is about the entire workforce pulling together,” replies Van der Horst. “We are very aware of the need to define the project together with the business teams. STP has always been a key attribute in our way of thinking and working, and this does involve the input of the frontline sales and business teams. Optimising existing processes is no longer enough. And it takes communication, which by its very nature, you never do well enough!” Joking aside, Blom adds: “Training and communication are key elements throughout the process and yes, it will obviously mean that some roles will be redefined, although most people see this as an opportunity to be part of a very innovative personal company.”
Looking ahead, Van der Horst explains the main objectives for this year: “The war for talent rages on. We use this project to attract excellent, top-of-class staff. Secondly and technically we will implement Vista by the end of this year, which is no mean task, and lastly, we want to enable mobile and flexible working where we can. It is all possible, but in our business it is also imperative to then focus on security, data communi - cation and, more importantly, information interchange. Indeed, we live in interesting times!”
This interview was first published in the October 2007 issue of Benelux financial services publication Banking & Finance.