How has the evolution of the banking and payments solutions marketplace driven asset managers to look for new options?
There are a few factors. People are very aware of how they manage their cash. In recent years, as interest rates increased, asset managers and investors have become more focused on banking and payments solutions, including deciding how to get cash in the right place at the right time in the right currency, avoiding trapped cash, and maximising yields.
The banking industry has struggled when serving this market — we hear complaints that it takes too long to open accounts, onboarding is convoluted, and they do not have easy access. Some of that is due to regulations with new account opening requirements, and some due to the inertia of banks not moving quickly enough to address a poor experience.
Clients have grown quickly, and their processes have not scaled at the same rate. Decentralised workflows, manual processes and reconciliations, and lack of automation are issues all clients are facing. They are looking for a trusted and reliable banking partner to help them.
More recently, fintechs stepped into that space. Clients opened accounts through partnerships and received technology solutions for their accounts. But fintechs cannot offer yield enhancement, and while they can move quickly and are not bound by banking regulations, they are not credit institutions and are limited in terms of adding value with balance sheet and being in the flow of funds.
Now, asset managers are searching for providers that can offer a strong client experience to reduce operational risks and burden, while also enhancing working capital and delivering economic benefits that come from leveraging a large balance sheet and network.
What does that mean for the industry as we move into 2025?
There is a great deal of focus on how to more effectively manage cash, away from the solutions that have been adopted in the last few years. There are trillions of dollars in ‘dry powder’ waiting to be invested in private markets, and as global opportunities increase — especially in emerging markets — asset managers need the ability to process payments and deploy capital more efficiently.
We see the activity continuing through 2025. It is absolutely critical that asset managers have cutting-edge infrastructure to support growth.
Managers must be able to move money quickly for investment activity, such as establishing new structures for special purpose vehicles (SPVs). The demand is there, and banking solutions underpin all that work.
Why is this the right time for MUFG Investors Services to launch these solutions?
We see this as the next logical step in our suite of services, which extend well beyond traditional fund administration and asset servicing. MUFG Investor Services is a division of Mitsubishi UFJ Financial Group (MUFG), one of the largest banks in the world, and it has a very strong credit rating. We can leverage an extraordinary array of capabilities and services, an extensive banking network, and highly integrated products.
We are using all those elements to create a marketplace for best-in-class solutions and to serve as an aggregator rather than a single provider platform. The distinct feature is that financial institutions can leverage our network for multiple solutions, regardless of where they have their accounts. Managers may overlay our banking and payment capabilities onto their existing infrastructure without changing their existing banks.
Asset managers already trust us with the key elements of their businesses — back, middle, and front office functions — so they know we have great depth and strength in coordinating entire workflows and end-to-end requirements. Our extensive fund administration experience, trusted operational partnerships, ability to develop customised technology solutions, and strong balance sheet places our firm in an excellent position to seize the opportunity.
It sounds like you have found a ‘sweet spot’ and a way to fill a gap?
We are presenting this as a single, centralised solution to offer the best qualities of both worlds — we offer aggregated treasury solutions, similar to a fintech, and we provide banking and payments services that asset managers require from a bank.
We can move quickly to develop client-centric solutions. Where it is optimal for us to be in the flow of funds, we will make our liquidity available. And we are willing to be a platform to act as a hub for other banks. End-to-end, we think about operational integration into a financial institution’s ecosystem.
What are the key features of the global platform?
MUFG Investor Services has been offering payments and banking services in various forms for years. What we have done now is allow all asset managers to tap our services even if they do not leverage our fund administrator services.
One of the primary features is providing asset managers one central location to manage all payments — domestic, international or cross-currency. For example, that could mean using the service to move cash between prime brokerage, custody accounts or cash accounts, or support third-party payments whether they are expense-related or investment activity. The platform will route the payment to away banks, or we can bring funds in house and deliver the payments directly.
How are the banking and payments solutions structured?
It begins with account services. All accounts with our bank are fully enabled to receive the full complement of services covering payments and collections.
Asset managers may open accounts in more than 20 currencies and these accounts provide instant access to cash while paying attractive yields. The variety of account services include call accounts, operational accounts, and controlled accounts, such as DACAs and Escrow accounts.
In addition, we can make domestic and international payments in 120 currencies in 150 countries, and the service is integrated to treasury platforms end-to-end. Users have digital channels to instruct the payments, whether it is via file over host to host, on our web portal, API, SWIFT, or other corridors.
You mentioned payments earlier. What are the key elements of your payments service and are asset managers required to have an account with your bank to use them?
A unique feature of MUFG PayStream is that asset managers are not required to have their accounts with us to use the payment options. We have created a just-in-time funding model that can pull funds from banks, and deposit that money into multiple accounts based on rules and business needs. That is extremely powerful from a cross-currency and international delivery perspective.
For example, an asset manager’s bank may not provide the most efficient channel to make payments in Brazil. The bank might need to engage a local Brazilian bank to handle the conversion, which could incur extra costs and require tying up additional capital. If the bank does complete the transaction, managers are bound to that pricing, which may not be transparent or optimal.
We can make payments in Brazil by taking the money from the client’s bank in their base currency, converting it into Brazilian currency in real time, and sending it to the beneficiary. Our services include sourcing FX liquidity through multiple banks to find the best rate, allowing clients to pre-clear beneficiaries so transactions are less likely to be delayed, as well as implementing a call-back process for enhanced security.
How is the Open Treasury Hub distinct from payment services?
The Open Treasury Hub takes the concept of payment services even further — asset managers send all payments to one central hub, and we can route it accordingly by leveraging our infrastructure to directly communicate with away banks.
This is purely a technology solution — a conduit — to manage payments and integrate with existing third-party treasury management systems. We are planning in the second quarter of 2025 to give clients the ability to view all account balances from the hub. By adding services including pre-validation, beneficiary management and workflow tools so clients can apply their business policies — including initiators, authorisers and trigger thresholds — it streamlines and provides a consistent and simple approach to manage all payment activity.
How have the new banking and payments solutions been received?
Feedback has been very positive because we are offering solutions to longstanding challenges for financial institutions. These solutions have also gone beyond addressing the challenges faced by the fund structures, and they are resonating with the management companies and general partners as the platform has been effective in supporting day-to-day operations and cash management for various use cases.
We see this as a very natural progression for asset managers who can use our modular services to improve cash management without a large investment. We also believe it is an excellent way for managers to begin a relationship with our firm, and if they choose, open bank accounts, and begin using some or all the solutions we provide across the entire value chain.
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