Although Covid-19 has accelerated the digital transformation of the financial services industry, it is still very much in its early stages, according to Guy de Blonay, manager of the £49.9m Jupiter Global Financial Innovation fund.
Whilst the migration from a cash economy to a cashless economy has intensified, he argued that many firms are still “not fully exploiting the data that is available, not fully exploiting the products that are available, and not fully understanding what clients really need”.
He added: “The jobs today will probably not exist within the next five years due to technology, the jobs that will be created within the next 10 to 20 years, we don’t even know what they're going to be.
“This is why I think we still have a long way to go before we get to a stage where we could say we are in a mature situation for digital transformation.”
For context, de Blonay (pictured) said that a company like Bank of America or JP Morgan who spend on a yearly basis 10 per cent of their revenues on financial innovation, IT maintenance and pure innovation, “will end up being called fintech [financial technology] companies, rather than banks”. 
He added: “It will be fintech companies with a banking licence rather than banks with a fintech operation.
“Certain firms have understood very early on the importance of ecosystem and building a business around technology to protect market share and to keep the innovative disruptors at bay, while they can find themselves where they want to be by either developing in-house or going through a joint venture or acquiring technology from competitors.”
The Jupiter manager said London Stock Exchange Group, a top-10 holding within his five FE fundinfo Crown-rated fund, was a good example of an incumbent that understood the importance of digital transformation.
“In the past, they were simply doing most of their money out of trading and IPOs and capital market activity,” he explained.
“Now they understand that the future is going to be monetising the value of data and as a result, they’ve made the major acquisition of Refinitiv which is going to bring them that exposure to a very important component of the equation.”
Performance of London Stock Exchange Group over 5 years
Source: FE Analytics
De Blonay highlighted Alibaba’s fintech company Ant Group, which is due for an upcoming IPO, as a good indication of what direction the financial services sector is going.
“They have digital finance, they have insurtech [insurance technology], they have credit tech, they’ve got payment solutions and for those who didn't know it before, thanks to this IPO, it’s going to show the world what the company of tomorrow is going to look like,” he explained.
“This is a 1 billion customer company that is benefiting from a cashless economy that is probably now at the range of 70 to 80 per cent.
“We are far from that for the rest of the world, 70 per cent of transactions on a global scale is still cash.”
This is why the FE fundinfo Alpha Manager is focused on investing in companies that are either embracing this digital transformation, or driving the disruption with new technology, and explained the top-down and bottom-up element to investing in this trend.
From a top-down perspective, he only picks geographies that have a favourable environment for companies to continue to flourish and avoid economies that are in some sort of a political deadlock or an economic mismanagement.
He highlighted the Hong Kong Stock Exchange as an example.
“That is going to be a cyclical company that's going to benefit from a few political decisions but also a recovery of its market,” he said. “We want to exploit a faster recovery on the Asian part of the equation here.
“On a bottom-up basis there are always going to be some reference stocks that are going to show you how far it can go, and Ant Group in my view is probably the global leader on where we might be able to get.
“With 1 billion customers, digital finance capabilities, the ecosystem, the holistic strategy that they have, it's quite impressive. I tend to find companies that are following the same strategy and building this ecosystem.”
Ant Group’s founder Jack Ma believes that China’s digital yuan and bitcoin could potentially be part of that ecosystem, establishing a new type of financial system through digital currency.
De Blonay commented: “Ant Group are very closely involved with the Chinese central bank for their digital currency, which is going to focus on M0 money supply which is the most liquid aspect of cash.”
He said it’s part of the trend, or acceptance, that digital currency could be part of the ecosystem of the future.
“I think digital currency as an experiment for China is going to be an interesting and important one,” he said. “The idea here is that if it works, and it's successful, it might well be copied in the west.”
Performance of the fund vs benchmark since 2015
Source: FE Analytics
Since Guy de Blonay took over as the main manager of the Jupiter Global Financial Innovation fund in 2015, it has delivered a 96.62 per cent total return compared to 40.87 per cent from the benchmark MSCI ACWI Financials index. It has an ongoing charges figure (OCF) of 1.08 per cent.