Last year, a friend of mine went to Harvey Norman to buy a fax machine. She’s in the health business and some providers still insist on sending reports by fax, or ‘snail mail’. When she asked the assistant to show her the fax machines, he laughed. He said, “We haven’t sold a stand-alone fax machine in years.”
So it was quite extraordinary, really, when Calastone landed in Australia two years ago, that almost every single managed fund and super back office was still using faxes to conduct client business. When investors wanted to buy, sell or change a product holding, whether it was for $50 or $50million, the order to do so was faxed.
In that year, around two million faxes were sent. Of course these were also received at the other end (most of the time) so that’s four million in total. Those four million faxes, laid end to end, would stretch from Sydney to Melbourne and half way back again – it would take 18 hours to drive past them all. Those faxes used 480 trees to manufacture, and laid one on top of the other would have formed a stack over 12 storeys high. And they would have weighed over 22 tonnes – more than four elephants!
That’s a lot of paper. And a lot of opportunities for things to go wrong. In working to automate these intensively manual processes I’ve heard so many horror stories about cupboards being moved after years, and piles of unread faxes being revealed that had slipped, literally, through the cracks. Of faxes blowing out windows, blank or half filled faxes being sent out for a days trading, machines being left without paper for days and critical requests being missed or taking weeks where they should have taken days.
So it was no surprise to us that the fund industry was keen for change. In the two years since then many of Australia’s top fund managers and seven of the top ten Australian platform administrators, representing around 60% of the Australian market, have joined the charge to automate the back office and reduce risk and cost for both clients and themselves. Early adopters have been seeing the benefits, like UBS, who in a press release late last year said:
“UBS was one of the first fund managers to perform electronic transactions through Calastone in Australia as part of a strategy introduced to ensure our customers have the best, most efficient systems supporting their investments. This has led to an increase in straight through processing coverage, both globally and domestically.”[Bryce Doherty, head of UBS Global Asset Management]
Straight-through processing is a big goal and one that back- and indeed front- office managers see as the ‘holy grail’. It impacts positively in so many ways – customer satisfaction; risk; compliance; cost. While true STP requires more than just killing off the fax machine, it’s a great first step.
Having been at the vanguard of this process in the UK, it’s really exciting for me to see history repeating itself here in Australia. As the UK industry reached, and then passed, the magical ‘tipping point’ where automation became inevitable, I was caught up in the excitement that only comes with fast and fundamental change to a whole industry.
So when I was asked to come home to Australia in Sept 2011, and aid the process again here, I jumped at it. A lot of our global clients had requested our presence down under and Calastone had made great inroads over the 12 months here till Jan 2013. As this has continued over the past year, education of automation and its benefits has formed a large part of my role as the domestic industry quickly became interested.
Automation and electronic messaging are great ideas. But if they’re such great ideas, why hadn’t anyone done this before? It’s a great question and perhaps just comes down to having started with the right partners at the right time. When our business started in the UK five years ago, the majority of UK and European funds were using faxes, too. That number has reduced to less than 20% now and is heading steadily to zero and I expect Australia to follow the same path.
And so we look to 2014 with the hope that we see the last of the fax machine. We’ve done so much, as an industry, in two years – I’m really excited to see so much more in the next two.