Japan’s NEC Buys Swiss FinTech Avaloq to Utilize AI, Blockchain in Financial Domain
Japan based tech firm NEC has acquired Swiss FinTech Avaloq Group in a deal worth $2.20 billion.
The company offers banking technology, specifically wealth management services to several top tier banks, in addition to digital asset administration facilities.
The technology offered by the firm is used to manage assets worth over $4.90 trillion.
Avaloq will assist in cementing NEC’s position in digital financial software arena by backing the later’s blockchain and tech solutions. NEC also stated that it would assist in strengthening the Japanese firm’s business in the digital governance landscape.
Takashi Niino, President and CEO of NEC, stated “NEC will be placing great importance on building long-term relationships with Avaloq and its customers, and aims to create new solutions that combine Avaloq’s software with NEC’s cutting-edge technologies.” ‘NEC the WISE,‘ the AI technology brand of NEC and its blockchain tools were prominent technologies described.
The takeover has come at a time when the financial sector is increasingly looking at adoption of path breaking technologies such as distributed ledger (DLT) and blockchain to achieve their digital transformation (DX) objectives. DX is a domain where Avaloq is positioning itself as a prominent player.
Digitization also got a boost because of the pandemic. Other than the likely increase in NEC’s financial services trail, governments are partnering with the entities in the financial sector to implement projects related to digital identities and tokens.
With regards to blockchain, NEC is presently working in tandem with Japan’s General Insurance Association to validate the technology’s capability. The eight unnamed insurers intend to build an app for joint insurance policies, implying the cover for every policy is spread across multiple insurers. Among other ventures, the NEC has also joined hands with the Tokyo Stock Exchange on processing of post trades.
Regarding that view, last week, the Chairman of the U.S. Securities and Exchange Commission (SEC) Jay Clayton, opined “It may very well be the case that those all become tokenized,” pointing to physical share certificates. Avaloq concentrates on banking software, digital wealth management, digital banking, and offering SaaS and business process as a service (BPaaS.)
NEC’s list of top clients includes Agricultural Bank of China, Nomura, HSBC, Coutts, Barclays, Deutsche Bank, and Societe Generale. The tool it offers pave way for financial institutions to offer cryptocurrencies such as Ethereum and Bitcoin.
The next phase in blockchain related plan is tokenization. Avaloq intends to ultimately offer financial institutions with tokenization of assets that are non-bankable, for example real estate or collectibles.
Last year was not good for Avaloq, which posted a net loss of $32.47 million amid a 6.4% increase in top line to roughly $663 million. A major share of revenue, 70% to be specific, was generated from European operations. Nevertheless, NEC’s CFO, Takayuki Morita, justified the acquisition price by stating Avaloq is expected to have an annual growth rate of 15% in EBITDA.
In the meantime, during the 2018 Banque & Innovation trade fair, Avaloq received the blockchain prize for its crypto investment tool, which paves way for users to sell and transfer cryptos and merge digital assets with other kinds of investment vehicles.
Later in the same year, Avaloq bought a 10% stake in Swiss blockchain and crypto firm Metaco, which facilitates banks and other financial organizations a possibility to leverage on blockchain and DLT.