The document discusses challenges facing the asset management industry and how fintech can help address them. It notes that asset returns are expected to be lower in the future, ETF penetration is increasing, and margins are expected to compress. It then outlines how fintech can help asset managers innovate processes, industrialize processes through tools like robotic process automation, and use blockchain to reduce intermediaries. The document advocates for asset managers and fintechs to collaborate through various partnership models and shares some of the initiatives its organization has taken to connect the two groups and drive innovation.

1. Muriel FAURE
Head of Innovation Mission
HOW CAN FINTECH SUPPORT ASSET
MANAGEMENT
BEAMA-OCTOBER 2019

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THE ASSET MANAGEMENT COMPANY VALUE CHAIN

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ITS COMPLEX ECOSYSTEM

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> Slower revenue growth linked to lower returns:
– Equities estimated return: 4 to 6.5% per year for the next 20 years,
compared to 7.9% on average for the last 30 years, (BCG)
– Bonds estimated return: 0 to 2% per year for the next 20 years,
compared to 7.9% on average for the last 30 years, (BCG)
> ETF penetration
– 10-20% of total AUM in EU compared to 50% in the US,
> Margin compression
– According to Mac Kinsey, operating margins should contract on
average by 0.3% /year for the next 5 years
Asset Management Industry Challenges

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> Innovate
– Invest in IA /Machine Learning to develop tools which will improve
alpha generation by reducing cognitive bias, improving risk
management and asset allocation, ( Machina Capital, Quantcube,
Oddo BHF, Sesamm...)
– Use IA to really know your customers and capture new ones,
(Neuroprofiler, Fundshop..)
> Industrialize your processes
– Use RPA (Robotic Processing Automation) for your KYC / AML
processes
– Use IA tools to detect errors in transaction computing, (NephlAI)
– Use NLP ( Natural Language Processing) to automatically write
instantly the fund manager comments and in different languages, (
Addventa)
How to Embrace these Challenges?

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> Reduce the number of intermediaries of the ecosystem
– Blockchain is a great technology as it links stakeholders on the chain:
• Successfull application to funds transactions (Iznes in production and soon to be Funds
DLT)
• Primary debt market
• POC on KYC portability,
• and many more to come
> And with a blockchain, tokens are created, and then
new opportunities emerge…but regulation and banks
need to adapt
How to Embrace these Challenges?

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Blockchain Utilisation in Finance

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> Working together:
– Inside:
• Create teams with data scientist and expert (FO, BO/MO, Sales/Marketing,
Risk/compliance)
• Welcome and facilitate employees ideas to improve processes with digital solutions
• Board level recognition of the importance of digitalization
• Top down and bottom up digital penetration
• Accept and learn from failure, accept longer project time frame
– Collaborate with Fintech
• Case by case
• Incubators, data lab, hubs..
• Partnerships, acquisition…
• We need each other to achieve our goals
– With the stakeholders: we face the same objectives of efficency,
revenue growth, differenciation, margin improvement…
• Stakeholders include Fintech, regulators,
How to Embrace these Challenges?

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> 2015: the President decided that innovation was strategic for its members and
created a Commission I headed.
> From 2015 and 3 times a year, conferences « Une Heure pour en savoir plus » are
organised: one topic and the Fintech solutions.
– Examples of topics: marketing and regulatory reportings, Big data and research,
blockchain for funds transaction, tax reduction for R&D investment, risk management,
IA for investment decisions… »Guide of digital transformation of Asset
managers » https://www.afg.asso.fr/guide-la-transformation-digitale-des-
societes-de-gestion-en-qsgp-30q-janvier-2017/
> 2017: creation of a blockchain workgroup with Fintech and asset managers,
> 2018: creation of Crypto asset workgroup with Fintech and asset managers,
> 2019: contribution to the elaboration of a regulatory framework for non financial
asset tokens (Loi Pacte)
> 2020: publication of the update of the guide of digital transformation, in english
What Have We Done at AFG?

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> Members use our events to access to Fintech,
> Through AFG, Fintechs and members have developed partnerships, or
just business,
> I have a least one meeting a week with a new Fintech: it is very
rewarding to see their solutions. For the last 2 years, a lot are in
blockchain and crypto projects,
> Fintechs need capital and clients,
> Working together makes us stronger and more creative,
> And innovation have no boundaries
What Have We Learnt?

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THANK YOU