Fintechs integrate with market infrastructure

According to the World Economic Forum (WEF), partnership and joint ventures between well-established market infrastructure and financial technology companies is key to gaining shares. They believe over-the-counter products are shifting to electronic trading.

According to the report carried out by the WEF, it is noted that brand new market platforms don’t often challenge incumbent institutions and that partnerships and collaboration between established institutions and fintech companies is the most successful path to growth.

Fintechs allowing for rapid innovation

The co-author of the WEF report, Rob Galaski said in a statement: “Fintechs have changed the basis of competition in financial services, but not the competitive landscape. Fintechs now define the tempo and direction of innovation in financial services, but high customer switching costs and the rapid response of incumbents has challenged their ability to scale”.

In the grand scheme of things fintechs haven’t challenged any financial institutions, but their partnerships have changed the financial landscape and the way people work in the industry.

The report used the example of Algomi. News was that Euronext, the pan-European exchange, and Algomi had entered a partnership, with Euronext acquiring a minority share in start-up Algomi.

Even when significant advantages in terms of efficiency exist on new trading platforms, financial institutions may prefer not to switch due to the high cost of doing so. They also would prefer to avoid disruption in the network of relationships they have built that characterise capital markets. This is another reason why partnership is often a better option.

Algomi news: developing software for Euronext

Euronext invested $10 million for a minority stake in Algomi in March. This deal involves working to develop relationships with regional exchanges to establish an automated trading system in North America.

This isn’t the only partnership for Algomi. In May, Algomi partnered with well-established fund manager AllianceBernstein to create software that shows an aggregated picture of bond liquidity.

This technology will benefit buy-side traders, allowing them to see a clearer picture of the often fragmented and complex market. Algomi’s ALFA technology will help traders make more efficient trades. Check back for more Algomi news at fintechwebnews.co.uk.