Finadium: Collateral Management Technology Vendors in 2019: A Finadium Survey

Finadium has conducted its sixth industry-wide survey of collateral management technology vendors, providing a comparative look at the development of this sector, and focusing exclusively on vendors providing collateral technology to a bank or buy-side user as a dedicated service.

Deepening requirements for collateral management sophistication have resulted in wins for technology vendors. From large, established firms to start ups, we see a new generation of collateral-related technology players growing to occupy niches. In a normal economic cycle, there would be winners and losers in the collateral technology space with some firms dropping out. In the current market, we see mostly a crop of winners, including small firms that are able to partner with larger institutions to provide their specific solution.

The big themes in this year’s survey of collateral management technology vendors are automation, business model evolution and uncleared margin rules (UMR). Vendors, their clients, market operators and data vendors all tell us the same story: a push towards automation is driving technology spend as well as new and creative product development. Regulation has helped, with the complexities of Europe’s Securities Financing Transactions Regulation (SFTR) being one example, and UMR as another. But at their core, clients continue with the old adage of wanting to do more with less. Automation is the one certain way that firms can reduce their operational risk, serve their clients well and manage internal costs. There currently appears to be no downside to collateral automation.

As the market has grown, collateral technology vendors have taken the opportunity to look closely at their own business models to see how they can better deliver value. One example is a large vendor moving to a more modular model, where components can be purchased individually leading to lower ownership costs. Another is partnerships between vendors: it used to be common that a small vendor would knock on the door of a larger firm and be rebuffed. Now however, we see a greater willingness from both sides to look at partnerships that support client needs. Vendors remain highly proprietary about their intellectual property, but perhaps less so about the idea that they themselves must be the developer of every tool that their clients consume using their platform.

This year’s survey covers 27 individual products at 22 firms. Seven years ago we could identify only 10 vendors with something called a collateral management solution. The expansion and diversity of vendors has come with an increasing sophistication on the client-side; new institutional desires for how collateral should work along with regulatory mandates means that newer entrants can have a viable business model. We can see that the startups of just a few years ago now have traction, and we expect them to be in business going forward.

A critical part of business success in the collateral space is subject matter expertise. The vendors in this survey are led by industry professionals with decades of experience; this is not a market for recent college graduates or Silicon Valley startups. Many of the products surveyed have overlapping attributes, but the intelligence behind them is what clients really want during the implementation and support phases. As collateral has become yet more complex, vendors have established themselves as a critical backbone of institutional knowledge in solving challenges across regulation, automation and balance sheet efficiency.

This report should be read by financial market professionals in the front office, operations and technology working to evaluate the vendor landscape. It can also be useful to investors in financial technology and to vendors themselves in assessing their competitive positioning.

A direct link to the report for Finadium research clients is

For non-subscribers, more information is available here.

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