How Blockchain Will Revolutionize Sweden's Mutual Fund Industry

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Sweden's mutual funds market is big. Almost everyone in the country has savings in it, and the total assets under management is valued at about 3.5 trillion Swedish krona (about US$431 billion). At the same time, the market is very outdated and long-overdue for a revamp. Could blockchain be the platform for change?

When Nasdaq and SEB began discussing a potential joint initiative in blockchain, they honed in on this market as a good candidate for the technology. In Sweden, there are many fund companies, and each one has its own asset registrar to keep track of share ownership. Solutions are siloed, and the processes are manual, paper-based and prone to errors. Orders can take days to go through multiple intermediaries on their way to the fund company, and tracking the status is difficult. Mutual fund purchases in Sweden must generally be prepaid, so investors experience delays. Given these inefficiencies, the costs are high and so are the fees. For all of these reasons, blockchain technology was selected for the joint initiative.

A distributed ledger, shared and trusted infrastructure with immutable records of transactions could improve efficiency in fund order management, payments and settlement; accelerate the transaction cycle; increase transparency; ensure asset safety and security; as well as reduce costs. That said, there are several solutions to increase efficiency in this space but as long as there are multiple infrastructures and standards, inefficiencies will remain. If a solution is to succeed, it will need the buy-in from multiple players in the industry.

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With the need for a collaborative environment in mind, Nasdaq and SEB went began discussing options to improve the situation in 2017. The two companies built a technical proof-of-concept and began modeling concepts and flows for transactions and payments, and for the asset registrar within a blockchain system. They also began modeling how a consortium could be set up with joint-ownership of the platform. That was Phase 1.

For Phase 2, four to six companies representing various parts of the mutual fund industry were invited to collaborate on this project. During this phase, the dedicated team of participants will analyze the commercial set up of the consortium model, including the governance and rules, and define the business scope. We will figure out how to align with the existing regulatory and legal framework. Importantly, we will also define our own respective business cases - the actual efficiencies that can be achieved, the cost savings and the revenue models for all parties involved.

This work will culminate in a "go" or "no-go" decision later in 2018. If there is enough participation and investment from the fund industry, the solution will be built and launched to an initial set of companies that deliver funds, payment features and fund order flows. If it is a "go-decision", this platform will likely be a game changer in the Nordics and attract the whole industry to join the consortium . It could also be transferred to other geographies across the globe - anywhere there is a mutual fund market ripe for disruption.

Please click here or below to watch a video about our vision for a blockchain platform for mutual funds. You can also download a Fact Sheet by clicking here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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