Digital Portfolio Management Technology for robo advisor and branch – Why is it so important for banks to now set the course for a sustainable infrastructure?

aixigo at the Finanzdienstleister der nächsten Generation 2018, Frankfurt

Once again, the Frankfurt School of Finance & Management Conference took place in Frankfurt on April 11. Bernard Ehrlich, Head of Consulting & future lab at aixigo, revealed to the audience the background of aixigo’s trend-setting portfolio technology. Which trends dominate the market? Which requirements for banking technology do these trends entail? Moreover, how did aixigo implement these high requirements?

As an introduction, Bernard Ehrlich initially reported on three key trends in the securities business: Regulation. Digitalisation. Big Data & AI. Each of these trends places special demands on banking technology.

Regulation does not only change investment advice. It questions the business model!

Driven by the MiFID II, banks are wondering whether the existing offer of investment advice is still the right business model for mass business – keyword cost transparency, quality and yield pressure. First banks are already withdrawing from the business field. 

An alternative: asset management, which is used as a business model by almost all FinTechs. A model that offers a better customer experience, lower regulatory hurdles in sales, and a high automation capability. The prerequisite for the use of asset management in the retail business is the speed and mass suitability of the systems on which the portfolios are managed.

We are competing for digital attention. Digitalisation redefines customer expectations.

In the digital business, the customer experience is the focus. If that does not fit, the customer shuts off faster than we blink. Innovation has become the standard in recent years. We all constantly expect new features from our digital helpers. He who does not deliver is old-fashioned. And it’s about relevance, not about information that is prettily animated but irrelevant. As a financial services industry, we no longer only compete with each other, but with all the others who attract the digital attention of our customers. Our goal must be to get 2 minutes of daily digital attention from the customer. 2 minutes a day, during which he deals with our offers. If you want to play along in the digital business, your systems have to meet two requirements: speed and flexibility.

Whoever wins and refines the resource Big Data, can change it to money with AI

We are sitting on a gigantic treasure. Data is raw material and we have data, many data, Big Data! But as long as this raw material is buried in the ground, it does not benefit us. Taking advantage of this means offering our customers new data-driven services or making today’s processes based on data cheaper or better. Two steps are needed: the refining of the data and the provision to any customer systems. Flexibility and mass suitability are the requirements bank systems must meet in order for the commodity Big Data to become gold.

Trends turn into demands – and demands turn into challenges

The trends regulation, digitalisation and Big Data / AI thus formulate three technological requirements: speed, mass suitability and flexibility.

But what does it mean to be fast? “If you’re standing in the dark hallway and tell Alexa to turn on the light but the light starts burning only 15 seconds later, you’ve already stepped on the tail of the cat.” Being fast means in digitalised business that users are no longer willing to wait. They want something and they want it now. Now has become the standard. And if we say now, then we mean a calculation period for any depot analysis of a maximum of 300 milliseconds. That’s damned little.

What does it mean to be fit for the masses? Being fast is not enough alone. Imagine, you are an asset manager and you are really fast … 300 milliseconds for a depot analysis incl. optimisation proposal. Just too bad that you are really successful and manage 100,000 customer depots – and today is September 11th. Now you want to relocate the depots as quickly as possible. You need 100,000 x 300 milliseconds. That’s 30,000 seconds! Do you know how long 30,000 seconds are? 8 hours. And the markets are running and running. Speed alone is not enough. At the same time they also need mass suitability!

And what does it mean to be flexible? Flexibility means being able to react to customer demands. Offering three options to choose from is old-fashioned. The customer, a consultant, a portfolio manager, a marketer or a product manager ask a question and it will be answered. This means, among other things, that precalculated data is no longer sufficient. It also means giving the many creative teams in our organisations the freedom to develop new user-oriented ideas and implement them quickly – without long project plans and release cycles.

And now let’s add another one: It is not sufficient to be fast. It is not sufficient to be flexible. And it is also not sufficient to be suitable for the masses. We need to be fast, flexible and suitable for the masses at the same time. And this combination is the big challenge for the existing legacy systems.

This is exactly where the aixigo High Performance Portfolio API comes in. It takes the raw material data from the legacy systems, refines the data and provides them quickly, in a mass suitable and flexible way to all customer systems. The aixigo API currently comprises almost 100 services. Each of these services can be configured via call parameters. The possibilities that result from this are almost limitless. This will make your infrastructure fit for the big trends in the investment business.

Why can we do that and others can‘t

When we started with the development three years ago, we first tried different approaches. Although calculations with fast graphics cards or special high-performance computers were significantly faster than the old machines, they did not reach the required performance. The programmers of mobile games lead us to the crucial idea. They make the impossible possible!

Basis of the aixigo High Performance Portfolio API are five basic principles that we did not invent but consistently apply. To make the data quickly available, they are kept in an in-memory database. To reduce processor latency, we use so-called cache oblivious algorithms. We guarantee the fast transfer of data between different algorithms via high-speed interconnections. We achieve this flexibility through a REST API design and an integrated BPM engine. In this way, we equip your custody account data with state-of-the-art technology and prepare you for the challenges of the future.

And what can be done with this technology?

There are no limits set to your creativity when it comes to using the API. In essence, we see different areas of application:

Portfolio analysis, monitoring and reporting. Here, the API can be used as an infrastructure component to provide your advisor frontends with processed data, to generate regular custodian reporting for clients, to provide detailed analysis results for marketing on-demand and in particular to feed an innovative digital depot experience for your clients with data. Be it apps, chatbots or speech interfaces.

Digital asset management. The API provides all the processes and functions required for digital asset management in the retail business. The flexibility of the REST API allows you to innovatively form the digital client experience yourself.

Of course, the API can also be used in the context of investment advisory processes and there support the automation of advisory processes to meet the requirements of MiFID II Regulation.

 

Contact us

aixigo AG
Bernard Ehrlich, Head of Consulting & future lab
solutions@aixigo.de

We look forward to hearing from you!

 

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