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“Technology offers a clear competitive advantage”- Interview with Alexandre Zeller in Sphere magazine

“Technology offers a clear competitive advantage”- Interview with Alexandre Zeller in Sphere magazine
Alexandre Zeller, Managing Partner

Interview published in Sphere magazine, 18 September 2020


What is the role of the Technology & Operations unit at Lombard Odier?

First of all, it is an important point of differentiation. We believe that a private bank such as ours can distinguish itself by focusing on three key areas. The first is its expertise, the quality of its offering, its products, its services and its investment solutions. The second relates to our values. We are a private bank that is very close to its clients and the Firm is managed in a collegial manner by several partners who are committed for the long term. This gives us the advantage of being able to take counter-cyclical positions from time to time. And finally, technology. This offers a clear competitive advantage. Lombard Odier has a long track record in this area – it was the very first bank in Switzerland to have an IBM mainframe.

Lombard Odier has a long track record in this area [technology] – it was the very first bank in Switzerland to have an IBM mainframe

To return to your question about the Technology & Operations unit, it brings together several activities. At the core is our IT platform, along with its operation and the team responsible for its development, infrastructure management, cyber-security – which is absolutely essential. And finally the back office functions, which settle every imaginable transaction type. In addition, the BPO unit is responsible for the ten or so clients who also use our platform.

How many people work in the unit?

Around 630 people, plus a few occasional contracted employees. This represents almost a quarter of our Firm’s workforce.


What are your main objectives?

To begin with, we want to on-board new clients to whom we can offer banking platform management and the settlement of all transactions. We intend to continue to pursue this plan. Next, we will continue to develop our own platform in house. For some time, we wondered whether it might be preferable to outsource and move over to a market platform. We ultimately concluded that it would be better to invest in and modernise the existing platform to maintain this competitive advantage and provide a superior offering to our clients. And finally, there is the question of managing our IT network, which many banks prefer to outsource. However, COVID-19 has allowed us to appreciate the extreme flexibility managing our own IT systems gives.

COVID-19 has allowed us to appreciate the extreme flexibility managing our own IT systems gives

What is your angle of attack for the Business Process Outsourcing (BPO)1 business line?

This business line was established by Lombard Odier in 2013. Over the next five years, Lombard Odier acquired several major clients in Switzerland and Europe. In 2018, the decision was made to take a break with the aim of consolidating our activities and conducting a strategic review in line with our motto “Rethink Everything”. We are now relaunching this machine with a refined strategy. We want to concentrate on small and medium sized private banks that have a business model similar to ours. We are looking at Switzerland and Europe, but we have put some restrictions in place. The banks need to be located in countries where we already have a presence because it is imperative that we have a comprehensive grasp of the regulatory environment.

We want to concentrate on small and medium sized private banks that have a business model similar to ours

What selling points would you put forward for the platform in BPO mode?

The Lombard Odier platform was designed for bankers by IT specialists with in-depth knowledge of private banking. As far as the platform itself is concerned, I would first highlight its rather considerable computing power, which allows it to process an almost infinite universe of instruments.

The second thing that stands out, which is, frankly, a stroke of genius, is that we use the same platform – the same environment as the parent company – in all of our jurisdictions. We are able to simply replicate our solution – which is not that common. This means that our BPO clients operate on exactly the same model: a single platform, regardless of the office or jurisdiction, in a segregated IT environment.

[The platform has] rather considerable computing power, which allows it to process an almost infinite universe of instruments

And I would conclude by outlining our expertise in tax-efficient asset management. Our tax reporting capabilities are very extensive compared with other institutions.


How does the BPO business line currently contribute to the Group’s revenues?

We do not separately report figures for our business lines, but our long-term goal is for revenues from our BPO clients to contribute to about a third of our IT budget. I would like to stress that we are not focused on maximising profit. We work with our clients in a spirit of partnership according to a model that is based more on cost sharing. We don’t want to take on more and more new clients and pursue growth at any cost. Instead, we believe it is both reasonable and feasible to bring together enough banks on the Lombard Odier platform to cover a third of its costs.
 

Remaining on the subject of the platform, is it really necessary for a private bank to develop its own IT tools?

For us, this is a strategic choice. It is not our core business, but we consider it to be a competitive advantage – a point of differentiation – and we want to maintain this aspect. We have managed to create a successful platform that enjoys real recognition. According to the feedback from our external asset managers, for example, who are used to working with numerous banks, it is an extremely well thought-out tool for investment professionals.

We have managed to create a successful platform that enjoys real recognition

In addition, we became aware that the offering in terms of market platforms was actually quite limited and that, in some cases, their shareholder structure did not offer enough long-term visibility.

In light of this, it is in our interest to keep up the momentum. Naturally, we intend to further develop the platform. We have christened this project GX. This will be a long and extensive process. Over the next ten years, it will represent Lombard Odier’s second largest investment after the construction of its head office. The budget is substantial because we need to meet several objectives simultaneously. We need to bridge the technology gap. The platform includes technologies that were the state of the art fifteen years ago, but now need to be replaced. We also need to speed up the digitalisation of our processes, a trend that has gained considerable momentum due to COVID-19. And to round it all off, we have to revamp the client experience.


In what way?

If there is one criticism, it is the look and feel of our systems, which have possibly not kept pace with the latest technologies as used by neobanks. We need to catch up in this area. It’s essentially a question of design. I think our clients expect our tools to provide a more user-friendly experience. The key is fluidity and clarity. Our systems need to be pleasant to read, look at and use.
 

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Beyond interface design, we also intend to shift our philosophy and put mobile first. The first consideration for our future developments must be how our clients will access information on their tablet or smart phone. The desktop version comes second.


What have you learned from your time as Chairman of the Board of Directors of SIX Group that will benefit Lombard Odier?

The importance of information security immediately springs to mind. At SIX, it almost became an obsession for me. One incident and the Swiss financial centre would be completely paralysed. I also became aware that the budgetary trade-offs rightly related to security are extremely challenging. There is no margin for error.

There is also the importance of innovation. It is essential to always be able to anticipate, always plan ahead. At the same time, we need to respect existing systems and not subject them to various experiments just to see how they respond.


How do you approach innovation for Lombard Odier?

In order to respond to the constantly accelerating pace of innovation, the platform’s architecture must be open and continually updated by integrating new developments and applications developed both in house and externally, depending on the area of expertise. On the GX platform, we intend to create numerous application programming interfaces (APIs), which will allow us to integrate several market solutions. We need to open up more.

For the digital native generation, we closely track cryptocurrencies and, to an even greater extent, blockchain. With regard to cryptocurrencies, we would rather wait until there is more central bank regulation. But we are more active in the area of blockchain. We have acquired an interest in Taurus, which develops digital asset and blockchain solutions. More and more opportunities are appearing on the radar, especially in the sphere of digital assets and the tokenization of illiquid assets. For example, we can foresee SMEs issuing bonds in the form of tokens. Demand right now is low, but we want to make sure we are ready for the day that market opens up.

We have acquired an interest in Taurus, which develops digital asset and blockchain solutions

When you arrived at Lombard Odier, Patrick Odier was delighted to be joined by an ally with whom he had fought “several battles for the financial centre”. What battles was he referring to?

Training, definitely. We worked together on the foundation board of FAME, which was headed at the time by Jean-Pierre Danthine and later became the Swiss Financial Institute. Patrick has always wanted to provide Switzerland with cutting-edge financial training. Next, there was sustainable finance – an area where he has proved to be a visionary – and access to the European market, which kept us very busy when we were together at the Swiss Bankers Association.


And what do you see as the current battles?

There is one where I have so far had less involvement than Patrick Odier: institutional asset management in Switzerland, which we need to position as a much more highly regarded centre of excellence than it is today.

We must now strengthen our position and our market share, particularly in the face of the changes in the regulatory environment that we are bound to experience

To broaden the framework, I would also say that we must now strengthen our position and our market share, particularly in the face of the changes in the regulatory environment that we are bound to experience. To deliver all of this, we will have to work together while consistently focusing on the quality of our products, services and tools for our clients.

 

1 https://www.investopedia.com/terms/b/business-process-outsourcing.asp

Wichtige Hinweise.

Die vorliegende Marketingmitteilung wurde von der Bank Lombard Odier & Co AG oder einer Geschäftseinheit der Gruppe (nachstehend “Lombard Odier”) herausgegeben. Sie ist weder für die Abgabe, Veröffentlichung oder Verwendung in Rechtsordnungen bestimmt, in denen eine solche Abgabe, Veröffentlichung oder Verwendung rechtswidrig wäre, noch richtet sie sich an Personen oder Rechtsstrukturen, an die eine entsprechende Abgabe rechtswidrig wäre.

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