I remember the first time I visited a bank’s trading floor. It was both a huge relief and mild disappointment to discover that it is nothing like the Wolf of Wall Street-style high octane drama that Hollywood would have us believe.
The overwhelming sound is one of humming computers and screens and people tapping out Bloomberg or Symphony chat messages and emails, thousands and thousands of emails. This chatter and hum is how capital markets operate — and how billions of dollars get traded in millions of individual transactions every day.
If I told you that between 3 and 6 percent of all capital markets trades fail or are completed late, maybe upon first hearing, that wouldn’t seem so bad. But think about it: as a consumer, would you accept that roughly every twentieth payment you make with your bank card doesn’t go through? I did the rough math and, for me, that would mean that I would have to chase failed payments at least once per week. Or would you be happy if your video streaming service went out for roughly an hour randomly every day?
We are unlikely to tolerate this for long as consumers, even if the main consequence is that we feel annoyed, and time has been wasted. For capital market participants, the consequences are much more far-reaching — from employing thousands of people in middle and back offices, whose job it is to chase failed trades (over phone and email), to having to reserve precious capital on their balance sheets against incomplete trades, to facing higher risk from open positions sitting on their books for days. Not to mention the potentially unhappy clients, lost profits, and even fines.
So, like so many of the problems B2B software solves, this one is as unglamorous as it is big, persistent, and tough to crack.
The root cause of this problem is that banks, asset managers, and other capital market participants don’t have a shared format or “ontology” in which to share trade data and, historically, have not been willing to share their trading book data on a network basis. This is the problem Access Fintech, our latest investment, is solving.
Founded in 2016 by fintech veterans Roy Saadon and Steve Fazio, Access Fintech’s platform allows capital market participants to share data about their trades in whichever format best suits them, from Excel spreadsheets to two-way APIs. That data is then cleansed, normalised and shared securely with counterparties, so that trade exceptions can be handled more efficiently and with less risk.
Access Fintech’s product team works relentlessly with market participants to agree workflows for handling exceptions, which then can become the “de facto” market standard. And to be clear, this is not an improvement, this is a genuine transformation. This is moving the market from millions of disparate phone calls and emails every day to a complete shared workflow and single source of truth.
The Covid-19 crisis has proven a breakthrough moment for CEO Roy, who previously founded the post-trade processor Traiana, which London-based inter-dealer broker ICAP paid $238m to acquire in 2007, and for the Access Fintech team. The sharp rise in market volatility at the peak of the crisis in March triggered a similarly sharp uptick in failed and delayed trades. With a growing backlog of trade exceptions to clean up, customers flocked to Access Fintech.
The last few weeks — and weekends! — have seen Roy and the team working tirelessly to onboard this wave of new customers. Their efforts were evident in the customer reference calls I took during our due diligence. I’ve always found these calls to be one of the most interesting parts of the investment process, but talking to Access Fintech customers was particularly engaging. Numerous senior software buyers at leading banks and asset managers told me the platform was “game changing”, and suggested it is “only the start” of its potential applications.
And they’re right. In raising their Series B funding, Access Fintech will forge ahead with something that has eluded capital markets for decades: a shared ontology and workflow for resolving commonplace operational challenges. The platform has the potential to bring greater efficiency to a wide range of verticals, from derivatives payment affirmation, to loan settlements, and beyond.
Access Fintech has already won the backing of major capital markets players — we are delighted to be leading this $20m round alongside existing investors Goldman Sachs, JPMorgan and Citi, and with Deutsche Bank joining as a new investor.
In the coming months, we’re going to be helping the business build out its team, and will be on the hunt for senior executives who can help it scale. We’ll support the team as it doubles down on onboarding the backlog of customers waiting to get onto the platform, and as they invest in sales and customer success teams. The Access Fintech team will also use this funding to build out the product further, engaging with the finance industry to define new and shared ways to resolve their most critical operational issues.
For the Dawn team, Access Fintech is yet another fantastic example of how B2B software has not only remained resilient through 2020, but continues to transform the working lives of thousands of people. As we continue to navigate the uncharted territory of a uniquely distributed workforce and ever increasing market volatility, Access Fintech is uniquely poised to solve some of the most urgent pain points of capital markets operations and beyond.