Blockchain-Based Fund Distribution.

The proof-of-concept has shown that a distributed ledger based fund ecosystem may not only reduce costs and risks for all parties involved, but also simplifies the distribution of fund solutions with a significant improvement of the customer experience.

Client
UBS Asset Management (UBS AM)
Year
2021
Services
- Project Management - Modeling and Testing Scenarios - Blockchain Impact Assessment - Target State Design and Development - Demo-Tool & Prototyping

The Challenge.

The Asset Management industry has so far been less affected by deep technological disruption as seen in other industries. Stringent regulations present significant obstacles to new ideas and entrants that further entrench the legacy infrastructure rails on which financial transactions operate. The sector has evolved to a multi-layered, multi-entity environment focused on generating and securing investors’ trust. Hence, today’s ecosystem is a “web of trust” which can be characterized by high complexity, numerous duplicated activities as well as requiring a significant amount of oversight, audit, and reconciliation.

We are constantly seeking to leverage emerging technologies to provide the best services and products to our clients.

UBS AM

On the flip side, in recent years there has been a lot of hype surrounding FinTech innovation in finance, but much of this was superficial and beneath the shiny UX lies the same plumbing and infrastructure that has been around for decades. Distributed Ledger Technology (DLT) and cryptographic technologies have been likewise bathed in hype, but there are good reasons to believe that it is “different this time” and that DLT presents a novel approach for financial transaction infrastructure. DLT promises compelling technology properties that could solve known industry pain points by offering solutions to the challenge of creating and securing trust and could ultimately enable asset managers to be better connected and to better serve their (end) clients.

What we did.

It is of strategic importance for asset managers to understand how a new, DLT-enabled distribution and client management paradigm could evolve. What might it look like? What will be the impact to the current business model and value chain? What are the benefits and limitations of the technology? And most importantly, what steps can managers proactively take early on to prepare for these challenges?

To gain clarity on the above, UBS Asset Management (UBS AM) initiated a project by partnering up with i.AM Lab and FundsDLT. The goal of the project was to evaluate the key benefits of DLT with a focus on fund distribution. Specifically, three hypotheses have been defined, examined, and assessed:

  • Distribution partners can be connected more easily using a DLT based distribution platform.
  • The user experience can be enhanced using a DLT based distribution platform.
  • The efficiency in fund processing can be increased using a DLT based distribution platform.

The hypotheses were tested, and insights were gained by building a Demo Tool on the FundsDLT platform that covers the onboarding and trading lifecycle of an investor in a D2C distribution model. With the Demo Tool, customer journeys (including all tasks from the asset manager, distributors and the transfer agent) were executed on the FundsDLT platform in a mocked live environment.

The successful proof-of-concept pilot has demonstrated promising potential of distributed ledger technology.

UBS AM

Alongside the development of the Demo Tool, various Deep Dive sessions were carried out for the various expert teams at UBS AM to explore the value and benefits of DLT in fund distribution in greater detail. The business case was viewed from different angles to structure a vision of how the technology could enhance future offerings.

How you can profit.

Get clarity on how a DLT-based fund distribution will impact

  • the modularity and simplicity of connecting the relevant distribution partners
  • the user experience
  • efficiency

by testing the core process of fund distribution with a proof-of-concept demo tool.

Establish a profound understanding of the benefits and limitations of DLT-based fund distribution in your organization. Initiate a vision in your organization on how the technology could enhance the business!

Are you curious to find out what blockchain means for your business? Let's talk.

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