Cracking the bank account conundrum


As Seen in LPEA Private Equity Insight Out #21

Sam Marsh, Managing Director, of Alpha Institutional sat down with Johan Herz, Head of Events & Communication at the LPEA to discuss Alpha’s global accounts solution.

So Sam, what is Alpha?

In a nutshell, we’re a provider of enhanced financial solutions, dedicated to corporates and institutions operating internationally. We blend high levels of service and expertise with new technologies to solve complex problems across three main areas: currency management, international accounts, and mass payments. We’re listed on the London Stock Exchange and backed by investors such as Soros Fund, Liontrust & M&G. As of December last year, we employed over 200 people across five global offices, with a sixth coming later this year in Luxembourg. We also transacted over £40bn whilst processing over one million payments. However, when it comes to the businesses we work with and the solutions we provide, our focus is still very much quality over quantity.

What makes you different to other providers in this space?

Although we’re a relatively large alternative finance company in terms of turnover and scale, we’ve built our business in a way that ensures we remain highly selective about the markets we operate in and the solutions we provide. As well as being solely focused on corporates and institutions, we also service these two markets via two specialist divisions. Our Institutional division has its own dedicated people, technology and infrastructure, all focused on the private capital space. By channelling all of our capabilities and investment into just a selection of solutions and markets we have a much greater impact. It’s about being specialists, not generalists.

A few of our members have mentioned your alternative banking solution; what exactly is this?

High-level, we’ve launched a solution that enables us to significantly accelerate the time it takes for GPs and their service providers to open accounts for the underlying entities within their investment structures in multiple jurisdictions. With us, an account opening process that would have taken our clients months will typically take less than ten working days.

How did the solution come about?

Historically the institutional division was always known as a currency management specialist to the private capital sector. We set the division up in 2018, but prior to this the original team and I had close to a decade’s experience working with the alternative investment market. As a result, we’re very in tune with the needs of our clients, but also the wider marketplace – from service providers to law firms, and all the way through to the associations like yourselves. What we’ve seen during this time is a sector that has evolved so quickly, it has in many cases outgrown the services and solutions available to support it. The provision of accounts is one well-known example of this, and an area where we’ve been working to provide GPs with better alternatives. To do this, we decided to combine our experience in the alternative investment market, with the technological capabilities of another division in the business, Alpha Platform Solutions, which has been developing our global accounts technology.

As many of the association members will know, we have been working very closely with existing clients over the past two and a half years to bring this solution to life. As a public company, we needed to take the time to make sure we got this right and prove its success before launching to the wider market.  We also recognised that for this to be a truly scalable solution, we needed to make sure the foundations were built to last. That ultimately led us to decentralise the business into two distinct divisions, each with their own dedicated teams, technology and infrastructure focused on their own marketplaces.

The decentralisation process started in 2020. Fast forward to today and we now have a dedicated team of over 120 people underpinned by a cutting-edge technology stack, working extensively throughout Luxembourg and the wider private capital jurisdictions.

How does your solution differ to a traditional bank account?

From a client’s perspective, we’re not changing the functionality of the account they have access to. Where we provide value is in changing the way the onboarding process is conducted and giving clients the certainty that they are working with a provider that wants their business and is prepared to deliver high levels of service to get it.

These are all things that you and I as private individuals (or even traditional corporates) take for granted. However, as your members are aware, investment structures are more complex, and as such, the KYC processes and systems that traditional banks have built do not typically factor in the additional speed and flexibility that funds need.

In our experience, with the growing demands of AML, this can’t be met with a one size fits all approach. It’s easy to say you’re a specialist, but we understand that in order to truly service this market, we had to embed the complexity and required flexibility into our infrastructure. As a result, we now have a purpose-built technology stack that caters for the complexities of alternative assets and have combined this expertise with purpose-built technology to ensure we can onboard clients incredibly efficiently and in a highly controlled manner, and then proactively support their ongoing needs with a dedicated team.

So, how are you regulated?

As a Group, Alpha holds two main regulatory licenses. For the provision of accounts, we’re currently regulated with the Malta Financial Services Authority as an Electronic Money Institution (EMI), and for our hedging services, we’re regulated as an investment firm.

As an EMI, we can still provide our clients with all the account capabilities they require, but don’t have to divert our time or resource into becoming (or running) a bank. It’s about focusing on what we’re good at, and letting the banks do the same their side.

How does a license for an Electronic Money Institution differ to a Credit Institution?

Without going into the wider complexity of the regulation surrounding being a credit institution, it’s easier to break down how our license impacts the treatment of our clients’ monies when utilising accounts with Alpha.

The reality is, the Credit Institution license covers all manner of different service lines, many of which aren’t relevant to us or our client base. We simply wanted a license that would give clients confidence over how their money is treated when utilising accounts with us.

Since the Electronic Money scheme was introduced in 2011, it has been used widely across all different industries. The key is that the money transferred into our IBANS is never legally recognised as belonging to Alpha. Instead, we have a regulatory obligation to safeguard all client funds and ringfence them away from Alpha’s own operational capital. So, whilst clients engage with Alpha, the money is ultimately safeguarded with one of two major international credit institutions.

Are you already working in Lux and what are your longer-term plans?

Yes, we’ve been working with clients in Luxembourg for many years and the adoption of our services has been increasing since the launch of our accounts solution last year.

For us, the growth of the Luxembourg market is extremely attractive; we see it as a great opportunity to not only partner with new clients, but also help support the growth of Luxembourg’s financial ecosystem as a whole. The alternative investment market that the country wants to attract, is very much our target market, which is why we feel our interests are very much aligned. As a result, we’re now committing significant amounts of time and investment to the marketplace. The start of this has been the hiring of Nick Maton, as Managing Director of our Luxembourg office, which we hope to launch officially later this year. Nick came from Intertrust in Luxembourg where he was Managing Director, and has over 15 years’ experience in the Luxembourg market alone, so we’re really excited to have him onboard.

Longer-term, we want to establish ourselves as a key enabler and innovator within Luxembourg’s financial ecosystem. Achieving this is about working closely with the market to understand what matters most to them and then evolving our product accordingly. This approach is ultimately how are international accounts solution came about, and is a core part of our client-led philosophy. Indeed, we’re already in the process of taking a new idea into a formal research phase based off feedback we’ve had from some of our clients in Luxembourg.

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