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Our cars can park themselves when we arrive at the office and ChatGPT can write emails for us — but many financial firms still receive faxes on a daily basis.
In our age of technological progress, it can be surprising to realize how many aspects of our industry are tied up in legacy systems and suboptimal processes. The reality of our industry’s technological progress — both how far we’ve come and how far we have left to go — became apparent in a recent study we conducted with Coalition Greenwich.
We surveyed dozens of capital markets professionals to understand the state of automation in their firms. Many of the insights we uncovered confirmed hypotheses we have long held about our industry — for example, as the T+1 settlement deadline approaches, the industry’s most pressing concern is missing settlement timelines.
Others were more surprising.
“It was a little mind-blowing to me that people are still using faxes,” says Audrey Blater, senior analyst at Coalition Greenwich. “I didn’t think they still existed.”
Upon reflection, our research revealed some realities about data automation that affect every firm, regardless of size. Some of these are challenges, others are opportunities — but every firm needs to learn how to address them.
1. Faxes, emails, PDFs, spreadsheets, and screen scrapes pose an ongoing challenge for document processing
It may be surprising for some middle and back-office professionals to hear that many firms still use faxes — but anyone who works in loans and CLOs, for example, knows the challenge of working with faxes all too well.
“It’s an industry precedent,” says Xceptor buy-side lead Alexander Gent.
Faxes may eventually be replaced with a digital data format, but until the industry as a whole adopts an alternative, firms will need to work with faxes.
Of course, faxes aren’t the only legacy data format that middle and back offices have to deal with in document processing.
While survey participants reported that faxes were the most challenging data type in post-trade settlement, many also say that they are still dealing with emails, PDFs, Excel data, and screen-scraped data. Though technology has advanced significantly in many ways, it’s hard to say when — if ever — outdated data formats will be fully deprecated.
The solution: using AI to digitize analog data with intelligent document processing
Luckily, there have been many advancements in intelligent document processing that can streamline how firms handle these data formats. For example, Alexander notes that firms that receive faxes, emails, and the like are power users of Xceptor’s AI plugins for optical character recognition and natural language processing.
2. Having high-quality data feeds won't solve your financial process automation problems
Many firms are looking to third-party vendors to provide clean, standardized data that alleviates many of the roadblocks to automation.
Having a high-quality data feed reduces the time and effort needed to cleanse, normalize and transform that particular data source. But most firms are dealing with multiple data sources in any given workflow. 53% of survey respondents use six or more upstream data sources and nearly one-fifth use more than 30.
Moreover, data isn’t the only source of complexity in automation. Firms also use multiple technology platforms (27% of survey respondents use six or more). Even high-quality data sources need manual configuration to integrate into a workflow that may include proprietary databases, general ledgers, portfolio management systems, and so on.
“It’s not the job of the data vendor to do that work for you,” Alexander says.
The solution: combining high-quality data with intelligent workflow automation
Intelligent workflow automation ensures that organizations can gain the most value from structured and unstructured data alike.
A data automation platform like Xceptor can transform data as needed for use in downstream workflows and use cases. This may include mapping a data source to internal business rules, configuring it to connect with proprietary endpoints or integrating it with unstructured data. Xceptor also lets you build workflows and custom applications so you can use your trusted data wherever it’s most needed.
3. The more products you trade, the more complex your data governance process becomes
In capital markets, growth begets complexity. The more asset classes you trade, the more systems and data sources you need to address.
Diversification is becoming increasingly important in today’s unpredictable market. Front offices, seeking yield, start trading more complex and global products. These products mean an explosion in potential information sources for the middle and back office.
One operations professional we surveyed told us that the number of data issues associated with securities, such as bank loans, swaps and other derivatives, is much higher than in equities. This professional expects the dynamic to continue, leading firms to integrate more platforms and reinforcing the lack of standardization that is negatively affecting operations.
“By default, there’s just more data to deal with,” Alexander says. “So you need more middle and back office solutions.”
The solution: taming technology complexity with a data automation platform
Data automation ties systems and applications together to create seamless flows of information and data.
With a data automation platform like Xceptor, you can automate previously manual processes to ensure that your workflows run smoothly, no matter how many systems you use. Xceptor connects front, middle, and back-office processes by transforming and validating data from any system, then delivering this data into the systems and workflows where it’s most needed.
4. You don't need to find one solution that covers every aspect of your process
It’s common for middle and back offices to use multiple solutions — in fact, some firms report using 30 or more systems. Some firms use third-party providers, others use homegrown systems and still others use a mix.
Asked if the industry is going to converge toward a single solution, Alexander explains that the multitude of systems is likely here to stay.
“These solutions are all really strong and powerful,” he says. He adds that proprietary systems are necessary for firms handling reconciliations that “are so complex that none of us can even begin to comprehend how esoteric they are.”
The solution: uniting third-party and proprietary solutions with process and data automation
In a world of multiple systems, the challenge is connecting them to streamline workflows and reduce the risks of errors, breaks and exceptions.
Process and data automation allows organizations to maintain their existing systems — from proprietary systems that handle unique requirements to best-in-breed point solutions — while creating a trusted source of data. Data automation software like Xceptor processes, validates and transforms structured and unstructured data, then integrates it back into operational workflows.
Are you ready to transform your business processes and deliver trusted data? Get in touch to learn more about the power of data automation.
