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How Fintechs Are Positioning For The Future

Tom Burroughes, Group Editor , London, 13 November 2017

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The Europe-headquartered group has new business segments in its sights, it tells this publication as part of a series of profiles of fintech businesses working in the wealth sector.

(This is part of a series of profiles of technology firms operating in the world's wealth management sector in which they explain their business strategy, plans for the future, and more.)

Objectway, the Europe-headquartered provider of digital software solutions to financial firms, continues to gain momentum in serving wealth management clients, and sees opportunity in the space for “emerging affluent” populations and areas such as differentiating services for custodians, one of its senior managers says.

And while 2017 has for many practitioners been “the year of MiFID II”, firms are likely to refocus time and budgets on business growth and development, Peter Schramme, chief business development officer and CEO for Objectway Ltd, told this news service in a recent interview.

“We are looking at solidifying and expanding our offering for emerging affluents,” he said, when asked about newer growth areas for the business, which is now a quarter of a century old. “We see the custodian market segment  as another area for providing leading edge digital engagement and decision support capabilities in addition to back-office services,” he continued. “It is no longer just enough to have transactional services,” Schramme said. 

The firm already has a range of wealth management clients, such as Rathbones, JM Finn & Co; Old Mutual, Investec, Standard Bank and Brewin Dolphin. It operates in an intensively competitive environment, with players such as Avaloq, SS&C Advent, Temenos, Iress and ERI - to name a few - pushing hard. An eye-catching quality of Objectway is how its products come in a variety of “modules” so that clients can pick and choose offerings they want, and customise them to suit their needs, rather than be required to buy a one-size-fits-all offering that will often prove a burden to install and fit alongside legacy systems. 

The rise of firms such as Objectway is also a continued sign of how wealth managers, saddled with regulatory costs, and trying to retain clients and recruit Millennials as customers, are farming out certain functions to outside players. M&A activity also creates challenges of marrying new systems to legacy ones, which can be tricky in an industry where some systems can be 20 or more years’ old. And last but not least, the industry operates under the spectre of cyber-crime and the challenge of making sure that all this personal data isn’t blitzed or accessed by criminal gangs.

In general, Objectway says it has reason to be optimistic. A couple of months ago, it was ranked at number 86 on the 2017 IDC FinTech Rankings, which it said is the most comprehensive vendor ranking in the financial services industry (that ranking is based on 2016 calendar year revenues attributed to financial institutions). Growth continues: In April this year, Objectway formed a distribution agreement with CPB Software, an Austria-based provider of business processing outsourcing and back-office solutions for private banks, asset and investment managers across Austria, Germany and Switzerland. More are on its way, on which we will comment soon. The business reports annual revenues of €60 million ($62.6 million) or more and now has over 150 clients across 16 countries. 

Delivering its service and product range requires a hefty workforce: there are around 600 employees working in ten offices in Italy, UK, Belgium, Ireland and South Africa.  Acquisitions have been notable recently: at the end of December, 2014, Objectway bought 3i Infotech Western Europe; it also bought the BETA Global European back-office system from Thomson Reuters in 2015; eXimius, the portfolio management software operation, was another Thomson Reuters deal. The last five years have seen extensions of business to France, Spain, Portugal, Ireland and the Caribbean.

Year of the MiFID 
If there has been a dominant theme driving business among clients, it is the Markets in Financial Instruments Directive – the second version – of the European Union, Schramme said. MiFID II’s requirement for firms to collect masses of data so they can - amongst others - disclose costs and charges to client, and prove they act in clients’ best interests, make big demands on IT budgets.

“It affects almost all business areas from the front- to the back-office. A need to re-paper clients, for example, affects the whole value chain. And that plays to our capabilities,” Schramme said. This is about being more transparent and also about having more organisational agility.”

“Clients are expanding relationships with us and we are seeing a surge in demand for all the things we do,” he said.

Moving on from regulation
A question that inevitably comes up is for how long can financial firms devote so much focus on regulatory requirements rather than expanding their business? “For us, 2017 has been primarily  allocated to exactly helping clients in reaching MiFID II goals; significant programmes are on the way to reaching their end-points,” he said. 

“The market has started to look again at a drive towards business value…MiFID II hasn’t really been about changing business models or approaches. People are now re-focusing on business projects,” he said. 

Schramme is an evangelist about opportunities to marry up the benefits of technology with a continued need for human contact between the advisor and client, such as harnessing use of two-way video, chat, co-browsing and the like. He says the potential for “industrialisation” of a part of the wealth management value chain remains largely unfulfilled and creates a big potential for Objectway. 

Wealth management is, Schramme said - referring to a recent Deloitte study - one of the laggards in its percentage share of R&D spending. “Only about 2 per cent of the most innovative firms [in the world] are in banking, and none of them are in Wealth Management” he added. Clearly, as far as Objectway is concerned, that sort of statistic needs to change, and soon. 

 

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