Creating a Seamless Client Experience with Virtual Accounts

THE past few years have seen digital transformation eradicate many barriers that previously hindered retail investors from directly accessing financial markets.

Amid the pandemic lockdowns, there was a significant uptick in trading interest and activity. Many tech-focused companies thus saw the opportunity to set up brokerages in Singapore, and one such firm was digital wealth manager Syfe.

Founded in 2019, the Singapore-based fintech started out by offering managed portfolios to investors. “When we set out to build Syfe, we wanted to solve a massive problem in the industry, where growing wealth felt complicated for many people, we saw the opportunity of building a platform to simplify investing, so that individuals felt confident building wealth for a better future,” said founder and chief executive of Syfe, Dhruv Arora.

Despite uncertainties in the market, Arora believes that opportunities exist in the region. “When you look at the Asia-Pacific, total retail savings are growing rapidly, with the number expected to hit US$46.1 trillion by 2026,” he noted, citing estimates by data analytics and consulting group GlobalData.

As Syfe’s business grew, users started requesting for the platform to facilitate direct stock investing. So in 2022, the startup launched its brokerage offering, Syfe Trade, which offers fractional trading of US-listed stocks and exchange-traded funds.

To create a seamless experience on its brokerage platform, Syfe knew that quick deposits and withdrawals would be key for users accustomed to everything on demand. This meant that it was imperative to have a process that could automate the recognition and reconciliation of incoming payments, Arora said.

In conventional banking, collecting payments from clients and partners require individual parties to quote the correct information, to ensure that receipts are allocated to the exact accounts and reconciled. However, this becomes a challenge when volumes are high, resulting in delays.

According to Arora, on average about 15 per cent of clients forget details such as a reference code or make mistakes during a payment transfer. This results in a cumbersome process that might take hours, days, or in some cases, make it impossible to locate the remitter, he said.

To tackle the problem, Syfe worked with HSBC to co-create a solution that leveraged virtual accounts (VAs) and instant credit notification for its brokerage platform. Once an investor has transferred funds from a bank account to a trading account, HSBC provides an instant credit notification and performs an automated name check with that unique VA number. Where there is a match, funds are directly credited to one’s trading account within minutes.

This solves the problem of manual reconciliation and provides greater security, but more importantly, allows investors to seize time-sensitive market opportunities, Arora said.

While fintechs have disrupted traditional banking, there can be synergy when strategic partnerships are established between nimble start-ups and incumbent banks.

Syfe, for instance, works with other bigger players in the market – client money is held in trust accounts with various banks, while client assets are held in custodian accounts with regulated financial institutions.

“We’ve always held the belief that it is not fintechs against the banks, but fintechs and the banks joining forces to create impact,” said Arora. “For a business like ours which focuses on digital wealth management, it doesn’t make sense to build our own fund transfer lanes. Therefore, we work with banking partners that have networks and expertise in this area,” he said.

He added that by using solutions from its partners, Syfe is able to lower its cost and focus instead on solving more complex problems.

A 2022 joint study by KPMG and HSBC on the region’s tech-focused startup landscape similarly pointed out that many start-ups see the benefits of partnering corporates, to address the challenges they face.

“Collaboration is a win-win, with start-ups gaining access to market exposure and customers, while corporates obtain innovative technology solutions that can help improve their business operations or access new markets,” according to the report titled Emerging Giants in Asia-Pacific.

As companies scale in size and geography, so too will their financial management needs change, necessitating that processes are streamlined for operational efficiency.

In July 2021, Syfe closed its US$30 million Series B funding led by Peter Thiel’s Valar Ventures, bringing its total amount raised to US$52.4 million. Among other things, the company said then that the funds would be used to expand into new Asian markets.

In Syfe’s case, its new digital solution supported the firm’s foray into an overseas market. It was able to launch the same setup in Hong Kong late last year. The fintech currently employs 130 people across Singapore, Hong Kong, Australia and India, with more than half its headcount in Singapore.

Looking ahead, Arora remains optimistic about Syfe’s growth, noting that the startup has added net assets month on month despite challenging market conditions.

“The retail penetration versus our Western peers is less than half, and we’re still at a very early stage of our growth. For example, the top three digital wealth managers’ assets under management combined in Singapore merely accounts for less than 1 per cent of the entire target market,” he noted.

“As users mature on their wealth journey and get more savvy... the aim is for our products to fit into their entire wealth accumulation journey, whether it’s managed fully, fully directed by the individuals themselves, or where we expect – somewhere in the middle,” Arora said.

The Covid-19 pandemic drove a surge in digital transactions. And with consumers these days expecting better and faster service, digitalisation is key.

“Consumers today continuously demand greater speed and convenience, which places pressure on corporates to deliver an experience that can match these expectations,” said Winnie Yap, managing director and head of global payments solutions at HSBC Singapore.

She noted that virtual accounts (VAs) are designed to help meet such consumer demands by automating the identification of incoming funds. Used in tandem with instant credit notifications, VAs can “enhance the overall customer experience by expediting internal reconciliation processes for corporates, which can then allow quicker application of received funds, or quicker release of goods to consumers”, Yap said.

Given the surge in real-time payments in Asia-Pacific, it is also crucial that organisations develop appropriate digital payment solutions to keep up with the region’s growth.

Following ACI Worldwide’s 2022 Prime Time for Real-Time report which tracks real-time payment volumes and growth across 53 countries, Asia-Pacific remains the most developed real-time payment markets globally. Singapore saw such transactions hit 256 million, resulting in estimated cost savings of US$105 million for businesses and consumers.

The research also suggested that the real-time modernisation of a national payments infrastructure can create a beneficial environment for all stakeholders involved in the ecosystem: consumers get to benefit from hyper-connected payment services, financial institutions get to future-proof their business in a highly competitive environment, while governments get to boost economic growth.

According to HSBC, VAs will see accelerated adoption over the next year. Amid rapid changes brought about by geopolitical uncertainties, businesses need to leverage technological tools to stay resilient, and solutions utilising VAs are coming to the fore.