Will the FinTech Revolution Wake Up the Sleepy Muni Market?

Financial technology (FinTech) refers to the use of new software and applications to improve and automate the financial services sector. This ranges from the technology deployed in back and middle office processes at financial institutions, to apps and web tools designed for wholesale and retail consumers. FinTech also encompasses new technological approaches such as cloud computing and blockchain and developing crypto-currencies such as Bitcoin.

The concept has been around for some time, but it is only recently that it has started to encroach on the municipal bond market. The biggest impact of FinTech is on markets with difficult, paper-led infrastructure, a lack of automation and standardization, and over the counter, illiquid trading practices. This could pretty much sum up the muni market! So why has it taken so long for FinTech to get going in this huge (nearly $4tn) bond market segment?

Fancy Car, No Gas!

One of the key reasons is that all the fancy financial technology in the world is nothing without the data to fuel the applications. It is like having a Ferrari parked on the drive, but no gas in the tank to make it move! The lack of access to useable electronic data on the muni market has been a major drag on the ability to deploy the new technology and processes. What data there is available is either too clunky to be integrated easily or is accessible only from a number of large vendors who ensure that it is expensive and legally difficult to use.

Efforts to democratize the muni markets have proven problematic (see the exit of Neighborly from the sector) but plans to ‘tokenize’ the market and make bonds available to retail investors in smaller denominations are ongoing. Other areas where FinTech is at work are investor communications, pre- and post-trade transparency, portfolio analytics, index construction, retail brokerage and back-office investment systems.

Pumping the Gas

BondView’s Municipal Bond Reference Data Service aims to provide much easier and more cost-effective fuel for muni FinTech applications. By supplying key municipal bond data that is technically easy to integrate, does not break the bank and can actually be used for the purposes intended without onerous legal restrictions, BondView is supporting the tech revolution in the market.

To find out how Bondview RDS can help you, see: https://join.bondview.com/bondviews-municipal-bond-reference-data-service, or contact us at [email protected].