Regulatory Focused Requirements Puts Tech in the Spotlight
Across the board financial services firms are all competing for increased return and growth of business opportunities. So it goes without saying, there is a critical need to shift and adapt quickly. Many firms will attempt to build out these capabilities in-house yet the challenge lies in that many firms lack the capabilities, expertise or resources required to implement as a solo-effort. As an example, if a firm were looking to adapt to a specific business requirement (i.e. regulatory, new business process, etc), they will often need to make significant and strategic investments into technology (ex. article) and the successful ones will understand that it is often by way of outsourcing non-core business processes, that will help best preserve the working hours of their business critical staff.
There are many service providers aiding firms in completing the business requirements necessary to run their businesses. Because there are a lot of firms who have a tough time doing it on their own, these services will help them to bridge this gap. When we look at this trend, it illustrates that the financial technology (or fintech) companies servicing this market are increasingly serving a business critical need.
To take a step back, the substantially broad “fintech” description covers many different types of services and offerings. Financial technology is a macro level industry trend, but we are also seeing this take hold in some specific market niches as well. One industry analyst has been quoted recently as saying “There is a push towards using digital technologies to achieve revenue growth. This is not only in using online and mobile channels, but for better use of data and analytics across all channels,” said Rajesh Kandaswamy, research director at Gartner. Specifically, the B2B (business to business) side accommodates a vast demand with a number of small, medium and large tech firms helping organizations to meet their business needs.
Many of the largest and most established investment management firms require a broad range of technology and services to help their businesses evolve and grow, as well as maintain a current footing in their markets. In the earlier days financial technology firms took on a different role, but over time we see commonplace presence by fintech firms in just about every different type of business process and specialization. By not expending limited internal resources in achieving this growth they accomplish one of the main objectives. The business processes in place vary by financial services firms, but there certainly are some commonalities.
Bloomberg recently published an article that provides an interesting perspective on this evolution where many smaller and more nimble investment firms are leading a technology change, even advancing ahead of their monolithic counterparts. This is an interesting crossroads, seen as an emerging opportunity for many nimble investment management firms, poised to see the rise of their slow to move competitors. Also, if you’d like to read more about this topic and have future articles delivered conveniently to your inbox, please sign up for our newsletter.
If we compare both established organizations and newer businesses, often times leaner teams have an advantage of being nimble as well as not being subject to the same regulatory requirements. There is a certain advantage of not being bogged down by old ways. Where many larger, more established and more “slow to think what to do” firms may need to rethink end-to-end business workflows for improvements, smaller and more nimble firms will often try to leverage technology early on as they grow, rethinking their workflows dynamically, which can result in significant advantage in quickly changing markets.
One of the effects of this change is that we are beginning to see savvy organizations who are very much aware of the power of leveraging external business expertise, technology and services in helping them achieve a scalable business model. These firms will often times maintain the lean overhead that will make them highly competitive while also being capable of managing significant business volume, by whatever metric. And it is through this strategic outsourcing that it is accomplished.
Throughout the business workflow there are many technology firms stepping in to fill the gap, offering services (consulting or SaaS) or platforms for investment managers. One example we have been writing about recently is related to firms complying with selling and distributing financial products, as part of the new PRIIPS regulation (i.e. Basics about KIDs for PRIIPs), And this is only one specific example we have seen first-hand at Anevis Solutions, but if you look around everywhere there are firms who are effectively leveraging financial technology, as both a strategic cost and resource saving solution for their organization, helping them to manage business expenses and achieve better business growth.