Fintech effecting generational shift in distribution – Alfi

Fintech developments are set to effect a ‘once-in-a-generation’ change to the efficiencies of existing fund industry processes, and bring about significant changes to the way fund products are distributed, delegates to the 2016 Alfi Spring Conference in Luxembourg have heard.

Outlining the result of research into fintech develoments in a report published jointly by the Association of the Luxembourg Fund Industry (Alfi) and Deloitte – How can FinTech facilitate fund distribution – the industry association noted that the scope of fintech has emerged from a narrow focus on back end facilities to encompass areas such as financial literacy and education, retail banking, investment and crypto-currencies

Meanwhile, Europe continues to catch up with the US, which continues to hold the largest share of global investment in fintech – which in turn outpaced overall growth in venture capital investments by 140% in 2014, figures suggest.

The report points to developments such as the use of roboadvice, where it sees no letup: Deloitte predicts that by 2025,  some 10%-14% of US retail AUM, some $5trn-$7trn “will be captured by roboadvisers”.

Luxembourg is looking to tap into such developments thanks to its position as an existing large asset servicing centre, but also because of the presence of tech sector companies such as Amazon whose Amazon Payments is present in the local fintech sector, along with names such as PayPal, Rakuten and Yapital.

In the area of asset servicing the report outlines opportunities associated with Blockchain – the description for technology that most of all replaces traditional ledger processes – as well as the ability to introduce digital passports and online know-your-customer (KYC) processes among other developments.

In the area of product management and marketing, the report identifies opportunities for fintech developments in areas such as using Big Data to facilitate more efficient portfolio and transaction data or improving ‘RegTech’ – use of technology to facilitate management of regulatory reporting by way of example – and cybersecurity. For managers looking to the D2C distribution channel, the report points to developments such as roboadvisers and improved access to analytics that can help both manager and end investor

Denise Voss, chairman of Alfi said: “Fintech is more than a buzzword. It will have a fundamental impact on the operating model of asset managers, distribution intermediaries and service providers, who are also facing new investor behaviours. The investment management ecosystem has not only to increase efficiency, but also to provide a better customer experience if it is to succeed in the future. In order to help asset managers and service providers to adapt their respectie business models, Alfi has established its Digital/FinTech Forum whose aim is to highlight the challenges and opportunities inherent in new digital technologies.”

Simon Ramos, partner of Deloitte Luxembourg, said: “Fintech will be a game changes in investment management operating models. Luxembourg’s strongly connected industry players are well positioned to ensure that Luxembourg is in the driving seat for innovation”

The Luxembourg government is supporting moves to try to attract more fintech development to the jurisdiction. According to Ramos this will play a key role in the emergence of a local fintech ‘ecosystem’; because with, for example, rents high in central Luxembourg, it is important to find solutions to demands for office space sharing as well as locations that fintech developers can afford to live in.

Alfi recently posted comments by video of its co-chairs of the Digital/FinTech Forum Serge Weyland and Steven Libby outlining efforts in the jurisdiction to promote fintech developments.

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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