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In this article, Mike O’Hara and Adam Cox of The Realization Group examine the business benefits, and challenges, from voice integration and collaboration in financial services. Voice trading represents a sizeable part of business for many firms and as technology advances, they are looking to reduce costs and integrate voice activity with other operations. Regulation and compliance have been drivers, but they are only part of the story. Commercial factors have created new incentives for integrating voice with other communications and improving flexibility.
Mike and Adam hear from Matthew Lempriere of Telstra, Martin Taylor of Radius Communications, Gavin Davis of enepath, Darryl McKinnon of Cisco and Jeremy Venables of Tullett Prebon. Thanks to progress in voice capture and storage, the advent of cloud computing and new voice-over-IP services, the vision of an integrated, scalable and flexible voice environment is for the first time a real possibility. But, as is so often the case, technology is only part of the answer.
Financial firms that trade via voice are coming under increased commercial and regulatory pressure to unify voice activities with other communication channels. The idea is to enable efficient collaboration both internally – whether it involves the front, middle or back office – and externally with clients, counterparties and regulators, wherever they may be. The number of communication systems at a single bank or IDB, however, can be staggering. Can they streamline and improve collaboration solutions across a range of devices, particularly as more and more voice and messaging services are IP-based and available via the cloud and hosted solutions? How can they leverage technology to gain maximum business benefit? There are a plethora of ways that market participants can answer both questions. But there are two words specialists say firms need to keep in their mind at all times: think holistically.
“You need to solve the holistic problem: how do people communicate with each other collaboratively and without friction? How do people communicate easily so that they can increase their efficiency?”
Matthew Lempriere, Global Head of Financial Services, Telstra
Pressure from all sides
Cost of ownership, legacy systems, changing technology, regulatory demands, the need to capture and store voice records, increased competition… there are no shortage of issues that sell side participants in the voice trading arena face. Matthew Lempriere, Global Head of Financial Services at Telstra, says there is also no shortage of solutions.
“There’s lots of technology in the market,” he says. “But much of that technology solves particular problems. For the bank to be efficient and forward-looking, you need to solve the holistic problem, and the holistic problem is around: how do people communicate with each other collaboratively and without friction? How do people communicate easily so that they can increase their efficiency?”
The question of efficiency is a significant one. Traders want turret-like functionality but management is under pressure to cut costs, and turrets are expensive. At the same time, firms need to integrate their voice systems with a host of other forms of communication and information systems, including a dizzying array of instant messaging systems for external communication and a variety of internal systems such as customer relationship management software as well as back and middle office systems and databases.
“You think that by taking telephones off desks, you’re going to save money,” Lempriere says. “But holistically, you’ve got to look and say, ‘How do I solve the bigger problem, which is: what’s the infrastructure for collaboration? What are the business drivers for collaboration? And then how does it all work together so that my staff are more efficient in their day jobs?”
Thanks to a number of technological innovations, companies have numerous ways to help solve this ‘bigger problem’ (see box on page 6). Given the backdrop of what is happening in financial services, the attraction of integrated voice and collaboration solutions is clear.
“Clearly there is margin pressure on our industry as a whole, both on the banks and the IDBs.
Cost is always an underlying issue,” says Jeremy Venables, Head of Trading Technology at Tullett Prebon. “I think it’s almost inevitable that the world will move this way. It’s just a matter of time and a matter of how certain firms do it.”
The idea of being holistic comes up repeatedly in conversations with communications and infrastructure specialists regarding voice. But being holistic can mean several different things. It may concern the way different departmental strategies are taken into account, such as a front-office focus on new markets and a back-office focus on compliance. Or it may have to do with different technologies across different functions. It could also involve overlaying legacy systems with new software and hardware. In almost every case, the onus is on integration.
One area where firms are looking at integrating systems is in merging internal and external communications. “The trend now is for these things to be coming together more, rather than having the voice trading external side running on physically separate equipment and networks,” says Martin Taylor, Director at Radius Communications, specialists in communications integration services.
“New technology allows you to have both of these types of functionality within the same platform, which brings the obvious benefits of not just saving space on the desk but also of potentially bringing up the back office communications to a higher standard of measurement and recording and so forth.”
“You need to solve the holistic problem: how do people communicate with each other collaboratively and without friction? How do people communicate easily so that they can increase their efficiency?”
Matthew Lempriere, Global Head of Financial Services, Telstra
An integrated, holistic approach is not only important in terms of unifying internal and external communications, but also in terms of working with legacy systems and a myriad of network issues.
“Many firms have a lot of legacy technology in this area, including dealer boards” Tullett Prebon’s Venables says. “But it is not just a matter of installing shiny new solutions, it’s also about making changes to the networks and thinking about how everything needs to be integrated into the users workflow, such as and including the dealer boards, although one would question if indeed those need to be integrated at all”.
That matters for sell side participants because they can’t afford to lose time or customer access due to issues with speed or functionality. Historically, dealer board turrets have allowed for all kinds of communication that other devices don’t support. Users can have private lines or set up conference calls quickly or barge into other conversations.
“It’s that immediacy of the conversation that hasn’t gone away. But people don’t want to pay a big premium for it anymore,” says Lempriere.
One trend that can help traders improve workflow is the general push in the industry towards IP based platforms because that gives firms scope for integrating diverse systems. For instance, Voice over IP (VoIP) and multiple chat systems can be run over the same platform.
“And then the other component is the ability to link those communications with information systems,” says Taylor of Radius, noting how all of the communication data could then be linked with a CRM system. “This is now converging in a way that was only talked about four or five years ago. Now you’ve got organisations actually having all of this and using it.”
While some firms are already exploring the possibility of an integrated voice/information environment, many are just coming up for air after years of regulation inspired change programmes. For these organisations, the prospect of new ways of simultaneously cutting costs and gaining benefits is tantalising. But there are challenges.
One of the biggest comes from the sheer number of different communication methods trading firms use. A trader’s job is to get the business done, and in the past, if that required adding more IM platforms, so be it. But maintaining various platforms can become costly. Some sell side firms are reputed to have dozens of different IM systems because traders need to reach out to every community they can. But firms need to be able to monitor those systems and they need to be secure, which adds up on a per-head basis. “It’s a hidden cost,” says Lempriere.
“Capturing and normalising voice data is a significant challenge. To be able to search a voice call you have to have the ability to convert it into a format that’s searchable, i.e. text.”
Gavin Davis, Chief Operating Officer, enepath
The need to capture all forms of communication is vital. When asked to help reconstruct a trade, dealers working with so many communication methods cannot be expected to remember which platform they were on for a given deal. But proving best execution, either for regulators or clients, means that everything needs to be recorded. “Then it comes down to how you’re capturing, storing, indexing and collating that, so that you can then prove later that you gave the best price to your trader,” Lempriere says.
Gavin Davis, Chief Operating Officer at enepath, an integrated voice systems provider, says that beyond capturing voice data, a firm needs to be able to normalise it. “It’s a significant challenge because it’s not just the different data types,” Davis says. “It’s also the amount of data.”
Without normalisation and storage in searchable databases, a firm is left to comb through voice records directly. “The problem that you have is you can’t search a voice call. You have to listen to it,” he says. “To be able to search a voice call you have to have the ability to convert it into a format that’s searchable, i.e. text.”
The first step is to ensure a system captures voice with high quality. This is precisely where the question of a holistic approach comes in, because voice quality depends on a confluence of factors including the network, the hardware and the software. Lempriere of Telstra notes: “With streaming video, you can buffer it so it doesn’t matter so much, but with real-time voice communication, there’s no tolerance for degradation.”
As well as the challenge of replicating a trader’s workflow, there are specific IT related issues if a firm wants to enhance the dealing room experience. For instance, in a dealing room or an office, a person can see if another person is busy or on the phone. Making such functionality available through hybrid voice systems adds a level of functionality that may not have existed before.
“It’s exploitation of the unified communications to give you additional functionality,” Davis says.
“We should be able to know not just whether somebody’s there but whether they’re available to talk to us.”
Firms also face cultural challenges. “We spend quite a lot of time with financial customers making our newer IP based systems behave in familiar ways, while at the same time offering productivity enhancements,” says Taylor of Radius. “You can recreate existing functionality, even it’s not completely logical. But we appreciate people have established working methods and if you are a trader, you’re used to doing things in a certain way. It’s not really for us to disrupt how you work.”
Venables echoes the point. “Preferred solutions are ones where it’s not necessarily a big bang”, he says. “That’s one reason why hybrid solutions that integrate desktop hardware as well as virtual systems are likely to win out in the future.”
Perhaps later, believes Taylor, a new generation will be comfortable working in very different ways. For now, the firm often works around existing practices and mimics them.
“We spend quite a lot of time with financial customers making our newer IP based systems behave in familiar ways, while at the same time offering productivity enhancements. We appreciate that if you are a trader, you’re used to doing things in a certain way. It’s not really for us to disrupt how you work.”
Martin Taylor, Director at Radius Communication
Executives such as Cisco’s Darryl McKinnon, however, say that when it comes to workplace collaboration, incremental changes simply will not cut it for some employees. He says that the most significant trend influencing the workforce today is the consumerisation of IT. If a company is unable to provide collaboration solutions that meet its employees’ expectations, many of them will start using tools which are outside the control of the organisation. This opens the company up to immense security risks.
“The goal – and the power – of collaboration technology is to help people communicate and share as naturally as possible. By improving the connections between people and information, companies can create an efficient workforce that is better connected, able to make decisions quicker and raise productivity to new heights,” says McKinnon, Cisco’s Managing Director, Collaboration Sales for Asia Pacific and Japan. “To unlock the potential and meet the expectations of today’s workforce, organisations not only need to provide an easy-to-use collaboration suite that integrates voice, video, data, and mobile applications, but also embrace a new workplace culture where employees have the freedom to work from anywhere, anytime on any device.”
Having addressed the challenges, financial firms can look forward to significant benefits from an integrated voice environment, systems specialists say. These are not only in terms of costs and revenues, but also operations, particularly when it comes to flexibility and scalability. This last factor stems from the move towards voice over IP (VoIP) and cloud computing.
Taylor says the focus has been on increasing the reliance on a customer’s self-hosted equipment and then shifting some of that balance up into the network. That means systems become more scalable and, of equal importance, easier to keep up to date. Advances in network technology also mean that networks and applications can be more secure.
“People want to be able to scale up and scale down more readily and they want to be able to work in more places,” Taylor says, noting one buy side client who is able to relocate to the south of France during the summer thanks to cloud technology. “The cloud provides the capability to have that same facility but in multiple locations.”
An additional benefit from the cloud, he points out, is that it can be easier to integrate new software. “In most cases you don’t have the luxury of a complete greenfield site that you get when an organisation moves or perhaps starts up in another form. You’re having to work with what’s there. The cloud is very good at overlaying existing infrastructure.”
A firm may decide to keep its dealer boards but overlay them with a cloud back end. For the trader, it is the same physical experience but instead of being run over wires, it goes into a private cloud, where recording, measurement and integration take place.
The business benefit that many executives have focused on with the cloud is cost. Taylor says firms underestimate how much they pay to maintain on-premise equipment, much less the expense of trying to expand it or update it. With the cloud, total cost of ownership (TCO) is often lower.
McKinnon of Cisco says questions about whether to use the cloud or on-premises technology
are less about following a status quo and more about what is ‘fit for purpose’ for an operating environment. Companies handling significant amounts of sensitive data often need to have on-premises systems. “But this shouldn’t restrict them from reaping the benefits of a cloud deployment across internal collaboration mediums. The addition of a cloud allows businesses to build upon what they already have to create an entirely new collaboration experience for their employees.”.
“The goal – and the power – of collaboration technology is to help people communicate and share as naturally as possible. By improving the connections between people and information, companies can create an efficient workforce that is better connected, able to make decisions quicker and raise productivity to new heights.”
Darryl McKinnon, Managing Directo, Collaboration Sales for Asia Pacific and Japan, Cisco
Perhaps the most enticing prospect from new voice technology is the possibility of gaining access to a huge amount of new data. Voice records, once digitised, tagged and integrated with other systems such as CRMs, can create a massive new source of information.
This has piqued the interest of those such as the world’s largest IDBs, which generate a lot of electronic data in the digital domain. “But the industry also produces a large amount of un-digitalised (voice) data,” Venables adds. “If IDBs can capture all the voice data on an ongoing basis, then I firmly believe that there are commercial opportunities within that to be exploited.”
Taking so called fuzzy, un-digitised data and digitalising it offers the chance to perform analytics and then provide information to the front office business to enhance performance.
Another benefit comes from allowing for collaboration that is more about customer experience and less about time-sensitive price discovery. McKinnon says companies have moved beyond the utility discussion of how to provide simple and secure voice. “The discussion is how do I achieve the greatest customer outcomes with the people and resources I have today? The answer from our perspective is to nurture a real-time collaboration culture and provide the tools to make that happen. By moving a customer’s interaction across to voice and then to video, businesses will be able to resolve issues faster and greatly enhance customer experience.”
Most of the pieces are in place to provide the savings, performance benefits and operational flexibility that voice based trading firms so keenly want.
However, these are early days and vendors are focused on education. “It’s only very, very recently that you’ve been able to have a data capture device on a desk that’s got multiple channels that can give you the sorts of outputs that you need,” Davis says.
Just as firms long ago learned that it made little sense to build everything in-house, suppliers and customers alike know that trading infrastructures and back office solutions will need to come from a variety of sources.
So, it seems, being holistic extends to procurement as well.
“It’s a question of, ‘How do you communicate efficiently with your customer? How do you cope with increased call demand? How do you manage the call flow that comes in? Can you automate some of that? Can you route some of that intelligently? Can you offer a better experience to your customer with a smaller footprint, with a smaller cost base?’” says Lempriere.
Happily for voice based traders, they don’t necessarily have to wait. For companies looking to gain these benefits and reduce costs, most of the parts are already available. As Lempriere says, “There are lots of different components that can now fit together to provide a holistic solution.”
Six ways technology can enhance collaboration
Session Initiated Protocol (SIP) – This protocol, commonly used in internet telephony, enables rich communications and allows for interoperability between different communications platforms.
Unified Communications (UC) applications – Real-time communication and content sharing can be in achieved in a single application which can be tracked over time. For example, a group of traders could create a “collaboration room” for a particular market and converse in real-time while securely storing related documents in that room.
Cloud UC – UC services enable firms to move from capex to opex and provide agility. As companies acquire other firms or expand, UC service providers with a global footprint can be a major factor in helping them be more efficient and more productive. Cloud UC services also support disaster recovery with replicated data centres.
Context-enriched experiences – Combining traditional push style communications/notifications with real-time information can help traders work better with their teams and service their customers. For instance, systems can be engineered where certain events such as a market incident can trigger collaboration rooms with relevant information.
Mobility – One of the keys to effective collaboration is being able to bring the right people together at a moment’s notice. Mobile voice services that allow financial professionals to work from anywhere can enhance enterprise-wide collaboration.
Voice capture and automatic transcription – Say a firm wants to have less typing, freeing up traders to talk more. New tools can allow it to capture the voice, translate it into text and dump it into a CRM.
