Automation, process and product standardization and other things have led the middle office to become less crucial in banking. In the retail sector, they are nearly extinct. Incorporate banks, however, process and product competencies are often concentrated in this office, which could very well become the hub for transformation into a more modern corporate bank. Before you disregard the importance of this office in your firm, consider what it could do in the baking sector and how that applies to your business.
Its positioning matters
In retail banking, new workflows, regulatory standardization, and tech advances made it possible for typical middle-office activities to be centered into one location. Combined with the simplification of product offerings, many retail banks were able to forgo the support this office normally provides.
However, corporate banks still maintain this office in many cases, with the offices tasked with handling product system setup, formalities, risk approvals, and compliance coordination. Some corporate banks have begun to reduce the support for this office by using automated workflows and more simplified processes instead. However, corporate banks, like investment firms, need to be able to offer more individualized solutions and customized products to clients. This, coupled with the wave of regulatory changes, makes a case for keeping the office to keep compliance in check, iron out wrinkles and handle other services before things reach the back office. Instead of changing how things are handled in this office, it’s time for firms to change the scope of the work.
What it can achieve
Conventional middle offices of the past handled operational support. Today, they should focus on management activities. This office can assume responsibility for product placement and development and provide the operational support needed for its processes. With customer and product segment management becoming more standardized, there is likely to be less product differentiation promoted by banks and firms. Instead, a centralized version of this office can handle all of these areas. Customization of products will still be possible for local client needs, but the changes will be made with predefined components. This way, the process of product setup and maintenance will still be fairly standardized in the back office. Customer segment management will have a similar approach, with strategic cornerstones set centrally with local deviations permitted.
There are more automation and standardization in front-to-back processes today than in offices past, and it’s the modern middle office that is behind this trend. This office is responsible for providing the tech environment in which processes are supported, and the workflow-supported handovers are a part of the streamlined process flow.
These offices can be the drivers of service digitization, and not only on a one-time basis. They should, on the contrary, continually translate the needs of a business into requirements and make sure there is the support necessary for those processes.
If you haven’t already, now is the time to take stock of all of your offices and their tech. Improved efficiencies across the board may only be a consultation away.