The benefits of technology applied to existing processes making them more efficient or effective should be very practical. However, it’s easy to get lost in over hyped terms such as ‘fintech’, ‘peer-to-peer markets’, ‘crowdfunding’ and forget what the practical benefit is.
In this post let’s open up a few scenarios and walk through them step by step, to examine the applications of new technology in existing operations value chains and delve into the practical implications and value at different stages.
To set the context, let’s imagine a private market lender with interests in setting up a digitalization strategy for the longer term and position their bank as a leader in the modern financial services market. To achieve this, the lender plans to open a sector specific marketplace where they will originate and lead deals, and invite other institutions with an interest to maintain a regulatory compliant profile, gain access to deal room to diligence and follow deals, with the option to participate in the syndication of these deals as a co-investor. Ultimately bring down the cost of capital, increase distribution and elevate the lenders corporate profile.
Opening Access for Capital Deployers
First and foremost, this creates new access for an institutional group that may not have been privy to deals of this type earlier (geography, niche, term etc) due to logistical factors such as administrative cost, proximity or lack of partners.
Roadshows for investors may now be complemented by the digital platform, which will keep the institutional audience appraised of new deals, developments even investor tools and education on the sector, lowering the cost of information distribution and giving a cost efficient model for including more institutions in deals. Face to face time is still vastly important, but now you can conduct those conversations with already informed clients and partners, and focus on actionable meetings rather than disseminating information.
One of our client has summarized the value of having a digital platform as simply as: “Before our digital platform, we were working with 25 investor groups. Now we are able to work with over 300 investor groups. We couldn’t do that without a scalable platform.”
Decreased Cost of Syndication and Deal Making
Syndication efforts are costly, endless roadshows and investor briefings, especially if dealing with investors in different locations or cross border transactions, together with all needed follow up can take months to close. Complementing these efforts with source of information and deal room tools, the discussion can benefit from robust information making the in person discussions much more productive.
Instead of fielding calls of potential information, what if the interested party would already have the information needed to make an educated investment decisions at their disposal before entering the discussion?
Distribution Unlocks New Avenues for Growth
Disseminating information through an online platform in an efficient manner also leads the option to open the platform to further stakeholders and expand operations into different institutional partners and even deal segments. By lowering the cost of deal making and opening new avenues for access, the platform could yield interest from new institutions and be able to accept deals of a different nature than before due to an updated cost structure.
Cost of Capital - Funding on Private and Capital Markets
Positioned well and successfully executed these factor directly into credit rating and cost of capital. Long term positioning as an investor in new technologies and opportunities should also yield a more attractive proposition for various partner discussions and a hiring tool in the marketplace. Those considerations aside, the cost of capital acquisition is often top of mind in organizations wherein lowered, the company itself should be more sustainable.
Fintech Part of a Long Term Modernization Strategy
We’ve delved into a few different areas of impact that digital platforms can have in a digitalization strategy when employed by an institutional client, such as an asset manager or private market lender. The applications and impacts of digitalization strategies can be very tangible, and we encourage our clients and partners to discuss them and how they can benefit their organizations, rather than the general trends of fintech.
To set the context, let’s imagine a private market lender with interests in setting up a digitalization strategy for the longer term and position their bank as a leader in the modern financial services market. To achieve this, the lender plans to open a sector specific marketplace where they will originate and lead deals, and invite other institutions with an interest to maintain a regulatory compliant profile, gain access to deal room to diligence and follow deals, with the option to participate in the syndication of these deals as a co-investor. Ultimately bring down the cost of capital, increase distribution and elevate the lenders corporate profile.
Opening Access for Capital Deployers
First and foremost, this creates new access for an institutional group that may not have been privy to deals of this type earlier (geography, niche, term etc) due to logistical factors such as administrative cost, proximity or lack of partners.
Roadshows for investors may now be complemented by the digital platform, which will keep the institutional audience appraised of new deals, developments even investor tools and education on the sector, lowering the cost of information distribution and giving a cost efficient model for including more institutions in deals. Face to face time is still vastly important, but now you can conduct those conversations with already informed clients and partners, and focus on actionable meetings rather than disseminating information.
One of our client has summarized the value of having a digital platform as simply as: “Before our digital platform, we were working with 25 investor groups. Now we are able to work with over 300 investor groups. We couldn’t do that without a scalable platform.”
Decreased Cost of Syndication and Deal Making
Syndication efforts are costly, endless roadshows and investor briefings, especially if dealing with investors in different locations or cross border transactions, together with all needed follow up can take months to close. Complementing these efforts with source of information and deal room tools, the discussion can benefit from robust information making the in person discussions much more productive.
Instead of fielding calls of potential information, what if the interested party would already have the information needed to make an educated investment decisions at their disposal before entering the discussion?
Distribution Unlocks New Avenues for Growth
Disseminating information through an online platform in an efficient manner also leads the option to open the platform to further stakeholders and expand operations into different institutional partners and even deal segments. By lowering the cost of deal making and opening new avenues for access, the platform could yield interest from new institutions and be able to accept deals of a different nature than before due to an updated cost structure.
Cost of Capital - Funding on Private and Capital Markets
- Decreased risk in the private company debt portfolio by including more capital partners.
- Lower cost of capital on deal making through more efficient deal making tools and investor communication
Positioned well and successfully executed these factor directly into credit rating and cost of capital. Long term positioning as an investor in new technologies and opportunities should also yield a more attractive proposition for various partner discussions and a hiring tool in the marketplace. Those considerations aside, the cost of capital acquisition is often top of mind in organizations wherein lowered, the company itself should be more sustainable.
Fintech Part of a Long Term Modernization Strategy
We’ve delved into a few different areas of impact that digital platforms can have in a digitalization strategy when employed by an institutional client, such as an asset manager or private market lender. The applications and impacts of digitalization strategies can be very tangible, and we encourage our clients and partners to discuss them and how they can benefit their organizations, rather than the general trends of fintech.
About the author - Markus Lampinen
Internationally awarded digital finance entrepreneur, active in pioneering new securities models worldwide. Has worked in digital finance since 2009, recruited over 100 individuals, built up a operations on six continents and been recognized as one of the top 100 thought leaders in crowdfunding. Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide - including the SEC, the European Commission and Italian regulator CONSOB - for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for digital finance. Markus has studied computer science and economics (M.Sc).
Internationally awarded digital finance entrepreneur, active in pioneering new securities models worldwide. Has worked in digital finance since 2009, recruited over 100 individuals, built up a operations on six continents and been recognized as one of the top 100 thought leaders in crowdfunding. Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide - including the SEC, the European Commission and Italian regulator CONSOB - for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for digital finance. Markus has studied computer science and economics (M.Sc).
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