How companies can continue to stay relevant in the WealthTech market

It is easy for a company to get complacent after establishing a foothold in the marketplace, but if you don’t disrupt yourself, you will get disrupted, Dave Simpson, head of EMEA at custom technology developer GBST, told FinTech Global.

GBST was founded back in 1983, when the financial technology sector was still embryonic and the first companies were shaping what would become one of the biggest industries in the world. GBST was working in the area before, “FinTech became cool,” Simpson said, but surviving and staying relevant over more than 30 years is tough and requires companies to continue to innovate internally.

“It’s very easy to get a bit complacent when you become mature,” he said. “But we’ve always had the mindset that we didn’t want to be one of those organisations, we wanted to keep the FinTech nature, at the heart of what we do.” A major reason the company has been able to do this is through its technology refresh programme, which sees it reinvests a sizable part of its profits back into its technology to deepen its capabilities and ensure it can continue to adapt to the evolving face of the market.

The market moves in waves of new technology, with the current being the internet of things and connected environment of micro services, he said. GBST has a range of services available, but its flagship solution is Composer, an end-to-end admin system for investment platforms, managed funds and pensions. Its technology streamlines the various processes of wealth management through a selection of application programming interfaces (APIs).

Under the company’s reinvestment programme, it has recently finished updating the service to meet current demands of the market. This upgrade covered four areas. The first was improving its database structure to be more cloud-ready. Its next change was to its integration layers to offer REST-based API service, which allows clients more granular access to data on the platform.

For its third update, the company looked to meet the ever evolving expectations of customers. This comprised of improving its Catalyst solution, a front-end service of Composer, to let investors and advisors manage their portfolio 24/7. The dashboard collates information from across the platform to give a holistic view of investments alongside business processing activities to increase efficiency and accuracy.

All of this work has helped the company stay relevant over the years and compete against all the new startups trying to disrupt the market. “We’ve never been afraid to try and test and embrace new technologies,” Simpson said. “The trick is always working with clients to find the applicability of it. You don’t want to end up in a scenario where you have an answer to something, but you’re not sure what the question is.”

These upgrades were completed after spending a large portion of time engaging in research and development, working with clients and industry bodies to find out where the market is headed. Simpson believes that digitalisation of the market boils down to automation, data aggregation, smart technologies such as AI and improved customer experience. Due to its investment programme, Simpson believes the GBST is positioned to be “in the FinTech space with a micro-service, event-driven architecture that clients will be able to take advantage of in the coming years.”

The company has managed to breakdown a monolithic platform into a series of components which a client can select from to improve their offering. Breaking it down into individual APIs enables a client to integrate the bits they need with their existing infrastructure, rather than trying to insert a single  block solution that does not work with other technology stacks. Given Regulations like PSD2 and the open banking initiative, the world is moving away from the idea of isolated services and instead is encouraging a connected marketplace where companies come together. “We are operating on the need to be connected across a number of players in this environment because we realise that when an organisation creates their own digital ecosystem of services, GBST will not be the only player there. So it’s important that we can connect and cooperate with a number of providers to provide that end to end solution.”

Upgrading its technology to keep providing clients with the services they need has clearly worked. Its Composer platform witnessed significant growth in 2019, with it handling £135bn in assets, representing a 25% growth on the previous year.

Industries no longer want to be siloed

Established wealth managers, asset managers and private banks have not really tackled their legacy systems and most of their environments are still heavily reliant on them. However, to stay relevant, Simpson believes they will need to review their product and distribution strategies in the coming years, as pressures on price and profitability get tougher.

He said, “Recent experiences with COVID-19 will also put pressure on the market. Similar to some of the pressures we saw in the global financial crisis, where it exposed a lot of the lack of profitability in the industry. Most of that was fuelled from legacy operations and technologies that were cumbersome to change and not able to adapt to changing customer needs.”

If this is the case, the market could see a number of players looking to embrace new technologies. Cloud systems could be one of those to really explode in popularity following the pandemic, he stated. This will be down to a number of institutions which have hosted their own data internally experiencing difficulty during the pandemic of getting easy access to their information and leveraging it.

The COVID-19 pandemic will expose the issues around profitability and could see more companies addressing their legacy systems and engaging with digitalisation services more eagerly. However, not all companies are able to embrace change and are building on sand, rather than fixing the basics. He said, “A number of firms will recognise it, but doing something about it is always the challenge. We have all read case studies and Kodak was a prime one. They saw digital cameras coming for years and to be honest, they were one of the inventors of it, but they couldn’t adapt their business to embrace it.”

There are plenty of opportunities available to those which can welcome change. A key way of doing this is by exploring new ways to do business through a “sharing economy.” Instead of doing everything internally, it can be better to look for other businesses whose services can complement their existing business models. The connected marketplace means a company can offer customers more varied services, such as a bank connecting the account holder to health insurance providers or a personal finance chatbot. Open banking initiatives, which are taking shape around the world, are fostering this. Businesses are working with others so they can provide their customers with more personalised and in-depth services, to the point where Simpson has seen a number of businesses go beyond typical wealth management.

“I think the typical segmentation has started to fall away, and organisations will play across all of those channels. A lot of it is empowered through the technology, which allows lower operating costs and make businesses more efficient as well as let them differentiate themselves at a rapid pace.”

GBST’s own client, Vitality is one of the companies to be exploring new routes of doing business. The company offers digital health and life insurance, as well as specific rewards for living a healthy lifestyle. The company aims to improve the health of its policyholders, reducing the likelihood of making a claim. Rewards include discounts or VIP experiences to a range of events. The company partnered with GBST to extend its reach even further and provide customers with investment services, enabling consumers to create a portfolio and better prepare for retirement.

“That health to wealth is something that they feel is relevant to a client. If they can help them be healthy, their need for insurance should go down because they’ve got longevity, therefore they can reduce the premiums. However, if they live longer because they’ve helped them, they will need to think about how they can help them to manage their wealth and retirement. So you can see how those connected business lines come together in a compelling proposition.”

GBST was recently named in the WealthTech100 2020 list, to check out the full WealthTech100 click here: WealthTech100

Copyright © 2020 FinTech Global

Investors

The following investor(s) were tagged in this article.