Avaloq's plan to establish a business process outsourcing (BPO) centre in Singapore signifies a paradigm shift in how financial institutions operate. While the trend among financial institutions to outsource routine business processes is well-established in Europe and North America, the practice is not yet common in Asia.

"This is going to fundamentally change how the banks and wealth management institutions operate," said Anantha Ayer, the newly-appointed CEO of Avaloq's BPO Centre in Singapore. "The model exists in Europe, it's well-tested."

Financial institutions outsource business processes to better focus on their core competencies. "Any process that is not a differentiator for a specific bank, but has a scale and potential for industrialization is best suited for BPO," added Ayer. "The classic examples are the payments systems, settlement or corporate actions." Instead of putting money and effort into supporting these processes in house, the institutions "can use the investment dollars on what actually differentiates them from others", he added.

Regulatory and compliance aspects in particular provide an opportunity for synergies and cost savings. Regulatory rules implemented by the BPO service provider will apply to all client firms within the jurisdiction.

Although some large asset custodians and transaction banks provide BPO services, independent organizations offer broader access to markets. "Avaloq provides connectivity to multiple custodians and multiple execution brokers," noted Ayer.

Avaloq has been in the business of providing technology solutions to financial institutions for more than 25 years. Seeing the emerging opportunity in BPO, the company expanded into the field with an acquisition of B Source in 2011. Today, it operates two BPO centres in Germany and Switzerland. The new centre in Singapore will initially service Deutsche Asset & Wealth Management operations in Singapore and Hong Kong. It will be fully operational by the third quarter of 2015.