Sparinvest partners with Euronext Securities Copenhagen to launch retail investment solution.
Investeringskonto FRI, Sparinvest’s retail investment platform, enables financial institutions of all sizes to offer their customers an easy, flexible investment solution.
Based on Euronext Securities FundHub platform, Investeringskonto FRI offers private investors a new type of investment account, where they can deposit and withdraw money in the same way as they would with a regular investment account.
Meeting demands for a retail investment platform
According to Jacob Snedker, Head of Sparinvest Services, there was a real appetite in the market for a simple, transparent way for retail customers to invest in the capital markets. “We launched a pension investment platform in the spring of 2016. And already by the fall, we were bombarded with requests for a similar solution for retail investments.”
Sparinvest spent the next three years trying to identify the right solution for meeting this market demand. “Building this type of system from the ground up is incredibly complicated,” says Lars Højberg, who was project manager and the platform’s co-inventor. “By the time we contacted Euronext Securities Copenhagen, we knew how we wanted to handle the retail investment side, but we needed a CSD to handle the order routing, issuance and payment settlement part of the process.”
Using the existing market infrastructure reduces costs and risk
In January 2020, Sparinvest met with Euronext Securities Copenhagen to see if they could provide the platform Sparinvest was looking for. “The main question Sparinvest needed to answer was whether to use the existing infrastructure for routing and payment settlement, or to build a process that ran independent of the existing infrastructure,” says Bjørn Crepaz, Head of Issuance & Issuer Services at Euronext Securities. “Reusing the existing infrastructure provides two concrete advantages. First, you reduce marginal costs, and second, you take a considerable amount of risk out of the project, because you’re integrated with the existing infrastructure.”
Creating a process to support retail transactions
Through a series of workshops, Sparinvest and Euronext Securities Copenhagen identified ways they could adapt the existing FundHub platform to match Sparinvest’s specific needs. Together, they designed a model where Sparinvest places a daily bulk order encompassing each financial institutions’ orders for that day in the system, thus minimising transaction costs. And as FundHub supports six decimal places instead of the usual five common in normal clearing systems, the system can be used for investment orders in cash amounts instead of only full units and still accurately give the investor the number of units corresponding to the invested amount with no cash remainders.
Both parties name flexibility and thinking outside the box as key success factors. “Sparinvest was really good at thinking creatively and in that way, they were able to find a model that works well,” Bjørn Crepaz says. Lars Højberg adds, “Even though some of the changes might have seemed infeasible at the outset, Euronext Securities Copenhagen was really responsive and willing to adjust their processes, so they could make the changes we needed quickly and securely.”
Empowering local financial institutions to offer a retail investment solution
After several hectic months of building up processes and onboarding financial institutions, Investeringskonto FRI went live with the first transaction on 8 June 2021. One of the first local banks to offer the Investeringskonto FRI solution to its customers was Andelskassen. “It’s been a good, exciting process to be one of the first to participate in the development of an entirely new way of investing – one which our customers have really embraced,” says Robert Krogh Lauridsen, Director of Wealth and Investment.
And it’s not just customers who’ve benefitted from the retail investment solution. The platform has given Andelkassen’s financial advisors confidence as well. “It’s been a bit of a gamechanger for us in the investment arena. Before, investment banking could be a bit intimidating for advisors because the advising aspect covers so many areas, and it can be challenging to convey those to customers. Investeringskonto FRI gives our advisors peace of mind, and the solution is built in a way that it’s easy and flexible for both our customers and advisors via the data centre infrastructure we have in place.”
Creating a solution like Investeringskonto FRI means that local and regional banks can offer their customers a retail investment solution, despite their relatively small size. “We would never have been able to develop this type of product on our own, which is why we’re happy that Sparinvest has an innovative approach and wants to be the preferred partner for financial institutions like us,” Robert Krogh Lauridsen says.
Jacob Snedker also highlights how this platform benefits the parties involved, and the market. “Clearly, this underpins our ambition to deliver top-notch, scalable investment solutions to our partners in Denmark. Investeringskonto FRI enables them to stay at the forefront by offering an easily understandable and easily accessible investment concept to their clients. In that respect, it’s significant that we can deliver a solution to local banks, which enables them to activate capital that was previously dormant.”
A platform with tremendous potential
Fast forward one year and Investeringskonto FRI has been quite a success, and Jacob Snedker sees ample evidence that the trend will continue. “We currently have 10,500 accounts, and we haven’t even on-boarded the largest banks yet. So, we’re only just beginning to realise this platform’s potential.” He believes that the potential will be unlocked, even though the current investment climate is not the same as it was a year ago. “When we first launched the platform, most financial institutions had instituted negative interest rates to the detriment of their clients. But even now, despite rising interest rates, we continue to see retail investors depositing substantial funds as the solution is transparent for them and free of transaction costs,” comments Jacob Snedker.
Sparinvest also plans to do their part to ensure the platform’s continued success. “In the future, we’d like to expand the service to other types of capital, for example company funds. And we’d like to digitise the solution to a greater extent, so it can be even more attractive for retail customers,” Jacob Snedker says. Robert Krogh Lauridsen is also optimistic about the platform’s prospects. “Thanks to the determination and cooperation of everyone involved, we’ve developed a platform that I believe will be one of the future winners within the investment universe.”