Banking & Capital Markets

The bank of the future will integrate disruptive technologies with an ecosystem of partners to transform their business and achieve growth.

Disruption is creating opportunities and challenges for global banks. While the risk and regulatory protection agenda remains a major focus, banks must also address financial performance and heightened customer and investor expectations, as they reshape and optimize operational and business models to deliver sustainable returns. Innovation and business-led transformation will be critical for future growth. To remain competitive and relevant, every bank must embrace disruption and strategically build a better ecosystem — not a bigger bank.

Our worldwide team of industry-focused assurance, tax, transaction and advisory professionals integrates sector knowledge and technical experience. We work with clients to navigate digital innovation, new business models and ecosystem partnerships, helping banks become the nimble, responsive organizations that customers demand.

The better the question. The better the answer. The better the world works.

Is your back-office holding your business back?

Back-office operations must be capable of supporting evolving product development to help meet a business’s growth ambitions.

The better the question. The better the answer. The better the world works.

How can the back-office maintain its worth?

Back-office systems must work seamlessly with continuous product development to drive greater value and propel growth.

It is often the unheralded part of the business, but back-office operations are vital to successful business performance, enabling greater efficiency at the front office and the delivery of better customer service. But updating back-office systems to meet the demands of a rapidly-changing business landscape can be challenging – and time-consuming – to get right.

Moreover, knowing how to transform these functions without disrupting product development and business growth can be complicated. Companies that fail to seamlessly blend new back-office systems and tools with product development can encounter persistent problems in the implementation phase.

One solution for companies struggling with these issues can be to turn to external partners for support. Close collaboration with an external partner can offer a fresh view of how to improve overall end-to-end operating procedures, without hindering a business’s existing growth strategy. 

For one fast-growing, online global payments systems business, updating its back-office operation was crucial to improving business efficiency. To do so, it licensed a new sub-ledger tool from a global software company and began rolling it out over a multi-year period. 

However, during this time, the payments business discovered several problems with enhancing the tool to meet its specific needs, particularly with issues concerning new product launches and the integration of acquisitions.

One of the unique features of the payments business is the sheer volume of transactions that it processes on a daily basis, making it the highest-volume client the software company has.

Recognizing the complexity of its back-office operations, the payments business decided to search for a specialized, external partner. One with the expertise to help it create an innovative approach to adding further enhancements to the sub-ledger, along with a strategy that would transform its end-to-end operating model.

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The better the question. The better the answer. The better the world works.

Building a sustainable, flexible partnership model

Working with an external partner requires a strong level of trust that can only be achieved through constant communication and clear objectives.

When deciding who to partner with, the payments business understood that not only would the external partner need to understand its product strategy and operating model, but just as importantly, it would need a clear idea of how to continually enhance the sub-ledger tool to support its ongoing product development and any bolt-on acquisitions.

As a result, EY was selected to help the payments business devise a strategy to turn its existing delivery model on its head. Helping the payments business to think differently about how to deliver enhancements to the sub-ledger would benefit back-office operations, and help to ensure that the back-office could keep pace with business decisions that were being made on a weekly basis.

Recognizing these requirements, EY embarked on a collaboration with the software company. By building on its existing collaboration, it offered broad services to the payments business.

The collaboration offered a unique advantage to the client:

  • By collaborating with the software company, EY had the opportunity to gain a better understanding of the finance ecosystem that already existed between the payments business and software company.
  • EY could gain a deeper insight into the challenges posed by the sub-ledger tool, allowing it to develop better solutions together with the software company.
  • By offering a managed service with flexible capacity, EY was able to assist in implementing a Finance Factory approach – providing the payments business with a sustainable working model based on a hybrid agile/waterfall approach (rather than just working to a traditional top-down approach, the hybrid model would also work toward nimble product production).
  • The creation of a streamlined operating model to help propel strong  product development and recommendations.

Another crucial deciding factor for the payments business engaging with the collaboration was the security of working within a fixed-fee arrangement. This offered the payments business a number of advantages including:

  • A fixed price point allowed the payments business to achieve 40% cost savings as compared with the initial determining costs, while simultaneously passing the risk of reaching a fully offshore India model to EY in the long-term.
  • The arrangement helped the payments business achieve its goal of obtaining a predictable spend. This compared to the volatility it had previously experienced with a traditional T&M model.

Proof of concept

The first steps EY took in working with the payments business involved broadening its knowledge of the sub-ledger. The development capabilities for the sub-ledger were unique, requiring additional skillsets alongside EY existing experience.

To help improve its understanding, EY engaged with ADWEKO, a specialized IT solutions provider for financial services organizations, based in Germany. ADWEKO proved a suitable vendor to work with as it already had a close relationship with the software company – having previously helped to build and test some of their applications.

Working with ADWEKO allowed EY to gain a thorough grasp of what technological solutions were needed to enhance the sub-ledger, improving back-office efficiency. This effort successfully demonstrated the EY team’s ability to bring the necessary capabilities to the payments business, and led it to a three-month paid engagement for the delivery model.

These steps led EY to winning a five-year managed service contract in which it has been engaged by the payments business to redesign its operating model and, specifically, to devise an alternative along with the software company to improve the software delivery around the sub-ledger tool. 

Forging the factory

The first phase of work, spanning three months, required designing a new delivery model.

The payments business’s front and back-office operations – an agile front office and a waterfall back-office system – generated a constant struggle between product innovation and back-office readiness.

The new model curated by EY not only had to bridge this gap, but also put controls in place to boost the quality of inbound requirements and streamline hand-offs between back-office development teams.

This involved the collaboration of teams across the globe that the payments business needed constant access to. Ultimately, this resulted in the composition of two main teams working to provide a standardized process, known as the EY Finance Factory.

The EY Finance Factory – an operating model that helps to streamline the broad process of product recommendations – helps the payments business keep a consistent product delivery process in place, seamlessly operating alongside the business’s changing priorities.

However, the initial implementation of this approach proved a significant cultural challenge for the payments business. As a result, it has been critical that EY maintain a careful balance between greater standardization in product development processes, while leaving enough flexibility to activate a quick turnaround time from product development to market-readiness. 

There’s a natural tension between rigid processes and being agile. EY teams are constantly balancing that flexibility.
Ian Langley
Principal, EY Advisory

Stakes in the ground

Cultural challenges have been addressed through the establishment of a strong level of trust between the payments business, EY and the software company. 

From the outset, the EY collaboration was aware of the fact that it was creating a working culture that hadn’t previously existed.

As a first step, each party clearly outlined what was most important to them:

  • For the payments business, it was essential that the collaboration came up with a solution that allowed its business to achieve higher quality output, on time, at a predictable price.
  • For the collaboration, it was important that all solutions were jointly agreed with the payments business so that it could carry out its work without any subsequent differences of opinion.

By taking this approach, all parties have been able to continually revert back to these aims and align any difficult conversations with these primary ambitions.

Along with building a strong relationship of trust, the alliance was also aware that it would need to create an even harmony between streamlining back-office processes and agile product development.

To achieve this, teams in the US, Germany and India have worked collaboratively to solve any issues that arise. This not only benefits the client, but also has been successful in cultivating smoother internal processes. 

International skillsets

One of the features of the EY teams’ work with the payments business is the global nature and breadth of experience among the teams working within the Finance Factory model.

It brings together expertise in finance management, IT advisory by way of solution architecture, subledger experience and more broadly, the concept of finance transformation. 

It’s a great example of teaming across EY technology and business competencies and infusing one of EY growth drivers in managed services to curate the right solution for the client.
Ryan Terlecki
Senior Manager, EY Advisory

Underpinning this knowledge and experience is the managed service layer and how it contributes to a successful relationship with the client.  

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The better the question. The better the answer. The better the world works.

A hybrid approach to financial operations

Greater efficiency in back-office processes can drive successful product development and business growth.

Traditionally, it has been difficult to implement an agile working policy in financial services. However, the EY teams’ hybrid agile/waterfall approach has enabled them to create a working model that allows for innovation, but within the parameters of the payment business’s operating model.

Back-offices will need to find a nimbler approach of helping organizations to launch new products faster as businesses look to capitalize on digital engagement with customers.
Ryan Terlecki
Senior Manager, EY Advisory

When looking ahead, one of the main considerations for the collaboration is to stay as close as possible to the payment business’s product development roadmap to help ensure that the back-office function can meet demand.

Frequent feedback sessions and open discussions between all parties ensure that the collaboration is continually asking:

  • What can we do to help?
  • What type of support model does the payments business need? Does it already exist in the Finance Factory or outside of it?
  • How can we help ensure that the back-office is doing what it needs to do to wholly support the business?

According to Ryan Terlecki, “what the hybrid approach proves is that there’s a way to strike a balance between speed and process, understanding what your core requirements are so that it’s possible to start developing a solution at the same time as you elaborate on the peripheral requirements through the product build phase – to be faster and more flexible with your business.”

At present, the collaboration’s work with the payment business has achieved:

  • Ability to get to market with new products up to 50% faster
  • Standardization of processes and governance which has enabled predictable delivery
  • Greater integration of M&A
  • Ability to easily add capacity and repurpose resources

The collaboration with the payments business demonstrates how having the agility to launch new products successfully requires a flexible approach to improving back-office operations. By ensuring that the back-office is adding critical value, companies can remain ahead of competitors and enable greater product innovation.  

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