Tokenblocks, you have created the “21st Century Transfer Agent”. Please could you tell us what that means?

A transfer agent is a middle-man who manages the operational process when an investor wants to buy into a fund, on behalf of the asset manager. Our modern platform gives an investor transparency over this middle man, allowing them to directly communicate with the asset manager whilst reducing the error rate of the transfer agent processing their transactions.

What exactly is the problem that you are providing a solution for? And is it a recent one or been around since the beginning of fund management?

Basically, we’re solving what we like to call the “Chinese Whispers Problem”. The industry has developed in a way where two parties will agree a transaction, log it into their own internal systems and then let middle men take care of the rest. From this point they’re blind to what happens and 2 days later when the transaction should have completed it will fail, or even worse process incorrectly!

This leads to cash being pulled out of bank accounts at the wrong time and hours spent on the phone chasing trade details, documentation and errors.

Did you realise that you could solve this problem whilst working in the banking world?

Yes! The problem of siloed data, miscommunications and costly operational errors is prolific across all aspects of finance. Working for a small trading desk meant that there were more than a few times I had to get my hands dirty with operational fixes. Our systems would apply different conventions to a trade and the smallest of differences meant the numbers didn’t match with our counter-party! The worst part is you only ever find out when it’s too late and by that point you’re already paying for it! This is why DLT is on the lips of so many players in the finance world.

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So why asset management specifically?

Fundamentally the last person I want playing Chinese whispers with money is the guy with my pension pot in his hands! Pension providers will invest in asset managers including hedge funds and often eat costs when things go wrong. Buying hedge funds is particularly bad as the lack of regulation has made their systems and processes even more lax.

The Fintech world is famously difficult to penetrate with new technologies. Do you think that it’s a matter of lack of education / trust surrounding blockchain?

Not really, I think fintech is one of the few industries that actually has a good grip on blockchain due to the huge potential for disruption. The current DLT focus is more in the wholesale side of finance and the difficulty then arises from the operational and regulatory risk of moving over systemically important infrastructure to a completely new technology.

How do you intend to work around this?

Firstly the value proposition shouldn’t be DLT. Instead there needs to be a clear, tangible benefit in which you can quantify the long term upside vs the short term integration cost. Ultimately, we solve an issue that exists around transparency and operational errors and DLT just so happens to be a great enabler, but it’s not the headline.

Secondly there needs to be innovation in the business model and a commercial understanding of ways to mitigate technology risk whilst delivering incremental benefit. This is where we have focused on the data management and transparency of transactions as opposed to becoming the actual processor of the transaction itself.

The most successful implementations of DLT I’ve seen in finance so far have often involved players dis-intermediating their own infrastructure. Our solution aims to build on their efforts as opposed to cutting them out. Ultimately, they’re the best placed to migrate their base infrastructure to DLT, not us.

Why is it so important that Tokenblocks uses blockchain? What does it enable your product to do that wasn’t possible before?

The key problem in this industry is that siloed data sets lead to different perceptions of the order data. A lack of trust in sharing internal data leads to miscommunications and manual errors. Blockchain enables a “cross-industry” solution which allows parties with mutual interests to share the same view of the world on a need to know basis. It then provides a cryptographically secured audit trail so that issues in orders can be picked up on the day that they’re submitted instead of 2 days later when real assets start to move around and it’s too late to fix miscommunications.

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How did you guys meet as co-founders? Have you worked together before?

We met at Imperial where we were both doing our masters degrees. We actually went on to start a business through an initiative called the Venture Catalyst Challenge. Afterwards Tom took the business onto an accelerator and I went into banking, but we both agreed we’d do it again sometime! A few years on and a ton of industry experience later we both stuck to our promise!

What does the next year hold for Tokenblocks after you leave our programme?

Next steps is to scale our solution beyond investors to the hedge funds and infrastructure providers so that we can offer an end to end solution. We’ll be working closely with trade associations like the Investment Association and the Alternative Investment Management Association to establish best practices when it comes to data transparency and operational risk management. From there we’ll incrementally transition over to being a processor of transactions and become regulated as a full 21st Century Transfer Agent!

Learn more about the other startups in StateOne here. 

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