2023 proved to be another difficult year, with many businesses being forced to enter survival mode and clamps were placed on budgets and resources.
WealthTech investment and deal activity were both on the decline during 2023. European WealthTech experienced three consecutive quarterly drops in both deal activity and investment. During the third quarter of 2023, WealthTech deals in Europe reached a total of 30, marking a significant 41% decrease compared to the second quarter of the year. In terms of funding, European WealthTech companies raised a combined total of $207m in Q3, a 34% drop on Q2.
However, this doesn’t mean the year was entirely unsuccessful for all WealthTechs, with many experiencing a great year of growth. FinTech Global spoke with several leading figures in the WealthTech sector to gather their perspectives on the year and how they managed during this period.
As to the question of whether 2023 had been a good year for WealthTech, Fredrik Davéus, the CEO and co-founder of financial analytics API developer Kidbrooke had unwavering support for the notion. He said, “I think the market has continued to mature, with more and more financial institutions in general and wealth managers in particular having their eyes set on leveraging technology to further their business goals.”
At the start of 2023, FinTech Global asked WealthTech companies to predict what the biggest trends of the year would be, and the rise of generative AI was chief among them. Their predictions were well placed as generative AI arguably became one of the most hyped technologies of the year. The technology dominated discussions of innovation and businesses clamoured to see how they could embrace it within their operations. In fact, a report from MarketResearch claimed the generative AI market size for investing could grow at a 30% CAGR to rise from $84m in 2022 to $1.1bn in 2032.
Davéus said, “Generative AI has impacted most industries one way or the other so it’s hard not to mention also for WealthTech. Not only in products and services but also in internal efficiency, making many processes faster and easier to work with. Then there’s the continuing regulatory developments with a lot happening with respect to consumer protection (consumer duty in the UK and the retail investment strategy initiative in the EU).” While generative AI was expected to make large inroads this year, Davéus was still surprised by how fast the ecosystem and adoption is going.
In a similar vein, Radomir Mastalerz, the co-founder and CEO of easy-to-use and affordable wealth management platform WealthArc, “The most prominent trend is adoption of generative AI. I have expected to see many startups leveraging generative AI, but definitely did not expect large corporates to jump on generative AI so fiercely.”
While larger firms tend to be slower in adopting new technology, this wasn’t the case with generative AI. Many are already exploring how it could be used. Investment giant Blackrock announced it will rollout generative AI tools for its staff and clients in January 2024, while NatWest and IBM collaborated on generative AI to expand the range of information and services accessible to customers through conversational interactions.
IntellectAI CEO Banesh Prabhu added, “The past year in WealthTech has been defined by the seamless integration of AI across the wealth management life cycle. This trend is largely due to the evolving needs of relationship managers and their clients, pushing firms like IntellectAI to innovate. Our focus has been on embedding sophisticated AI into operational processes, providing wealth managers with tools for enhanced client engagement and operational efficiency. This trend underlines the industry’s commitment to leveraging technology for more personalized and insightful wealth management experiences.”
While AI was at a common talking point, Banesh was surprised by how quickly AI-powered solutions were adopted. AI has been around for many years and adoption has been steady, but the excitement around generative AI seems to have encouraged firms to move quicker with their implementation of solutions.
He added, “One surprising development in 2023 was the rapid adoption of AI-driven solutions, like our WealthForce.AI, in wealth management. These solutions integrated effortlessly with existing systems, enhancing operational efficiency and client engagement. This trend highlights the industry’s readiness to adopt innovative technologies without requiring major overhauls, a testament to the evolving technological landscape in wealth management.”
On a company level
Moving away from the industry trends, FinTech Global asked the participating companies how they fared during 2023. While the market went through a tough time and many companies struggled, Kidbrooke, IntellectAI and WealthArc were all happy about how they grew over the past 12 months.
WealthArc’s Mastalerz stated that 2023 fully met its expectations and achieved all of its goals. They said, “We are most proud of our international expansion. This year is the first year in which we acquired more customers from other markets than Switzerland. Our Swiss origins and focus on quality are strong, but at the same time we are becoming a global player on the market of wealth management software.”
Kidbrooke’s Davéus praised the year as a huge success, with the WealthTech company welcoming several new customer partnerships. He added, “In a sector with rather long sales cycles, it is always nice to have several new customers making the decision to work with you.”
Just highlighting one of Kidbrooke’s new partnerships this year, the company teamed up with Abu Dhabi-based HAYAH, which provides life insurance solutions to the UAE market. As part of the deal, HAYAH gained access to OutRank®, Kidbrooke’s financial simulation engine driving the ALM functionality for self-service goals-based investment journeys.
The service allows customers to set-up investments predominantly using collective investment vehicles such as portfolios of mutual funds and ETFs, to meet one or more investment goals as defined by risk/return, future cash flows and a time horizon.
Commenting on the biggest success of the year, Davéus pointed to the team’s ability to gain more business. “Definitely closing more business, and with customers with a focus on the advisor-led or physical channels as well as digital ones where we have excelled in the past. I think this is thanks to the overall trend with firms looking for cost efficiency, but also for consistency across channels with regards to the analytics output they show their customers.”
Finally, IntellectAI’s Banesh described 2023 as a year of “significant achievement” and even surpassed initial expectations across a number of facets. A key milestone was the deployment and addition of AI-powered tools for its WealthForce.AI platform. This served as a critical role in streamlining operational processes, enhancing client experiences, and fostering a culture of innovation for customers, he said.
However, the biggest achievement for the year was the adoption of eMACH.ai across various global financial institutions. eMACH.ai is the company’s cloud-native and future-ready open finance platform with embedded artificial intelligence. The platform was designed to help banks leverage the cloud and AI to transform their digital operations.
He said, “This advanced technology framework, characterized by its event-driven, microservices-based, API-enabled, cloud-native, and headless architecture with underlying AI models, has proven crucial. It enabled unparalleled agility, scalability, and faster time-to-market for our clients. This implementation has been a game-changer, allowing us to enhance AI capabilities significantly and tailor our services to diverse geographical markets effectively.”
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