Fintech firms are promising innovative measures to increase efficiency, enhance offerings and foment growth, as market modernization plays an increasingly important role.
Much of this innovation is represented by new analytical tools and portfolio management programs. Their backers say each of these services addresses a particular need within the fractured market, and they all rely on the two most heralded forms of modern technology: cloud native technology and artificial intelligence.
The company
"I would say our philosophy is super simple. We start with the workflow and work backward into the technology," Munichain founder Matthew Gerstenfeld said. "Munichain is building software around the actual people and processes involved in the municipal lifecycle, and I think the long-term opportunity is much larger than just digitizing individual processes. It's really talking about connecting the workflows that currently operate in isolation."
BondIT focuses more on portfolio optimization, providing a product that takes strain away from firms to allow them to spend capital in other areas.
"The company was founded in 2016, and the thesis behind the founding was to apply tech to fixed income, specifically utilizing optimization and over time AI to make the fixed income workflows immensely more efficient and scalable," BondIT head of North America sales Andrew Merrill said.
SimCorp serves its clients by providing analytical tools that help them better understand market risk through its risk management platform Axioma Risk.
"Municipal bond investors need to manage interest rate, credit and spread risks across often
large and complex portfolios. Axioma's municipal bond analytics help investors better understand those risk exposures, perform scenario analysis, and analyze risk consistently
across the market," SimCorp's product team said.
While these companies focus on a specific aspect of the muni market, their products incorporate the same technologies, each utilizing AI and cloud tech to support their respective products.
"Our system is built on the latest capabilities in our market," Gerstenfeld said. "Obviously, it's cloud native. We use Microsoft Azure. We use all the tools that are available to actually define the data points and allow users to do something with it instead of just having it sit idle."
Merrill said BondIT uses different large language models and observes their strengths across them to inform its tools. Moreover, the company continues to use AI to push its products further.
"The optimizer was basically built pre-AI just to make the workflow automated, and then we've sort of sprinkled in the AI more and more just to drive new development," Merrill said.
Cloud technology makes risk analytics more scalable, flexible and easier to integrate into clients' existing technology environments," and "allows users to access our risk analytics without the constraints of traditional infrastructure," SimCorp's product team said.
On the other hand, AI allows the company to stress-test portfolios and conduct scenario analysis within existing investment workflows more efficiently and in a simplified manner, according to the product team.
Even with an embrace of technology and market modernization, Gerstenfeld said it's also crucial to understand the market before trying to fix or improve it.
"First and foremost, I think building technology for the mini market requires a core understanding of the market first and then the technology second," he said. As the market continues to evolve, "we're actually trying to rethink how certain workflows operate from a first-principle basis. And with that institutional knowledge embedded in the workflows, great technology has to actually capture that knowledge as well."
