Asset Management as a Digital Platform Industry: A Global Financial Network Perspective

Abstract

While contemporary technological disruption is increasingly conceptualized in terms of the logic and paradoxes of the digital platform economy, discussions of "FinTech" have only engaged to a limited extent with these debates-particularly from an economic geographic standpoint. Here we fill this gap by proposing an adapted Global Financial Network (GFN) framework for conceptualizing the organizational and geographic logic of the digital platform economy in finance, and applying it to examine the impact of the digital platform model on asset management. As we will show, asset management is being profoundly disrupted by what we dub digital asset management platforms-or DAMPs-which encompass services including index fund and ETF provision, roboadvising, and analytics and trading support. Like other digital platforms, DAMPs do not so much leverage technology to enhance their competitiveness within markets, as to radically restructure the market itself. Also, like other platforms, their rise has produced a winner-take-all paradox of centralization through democratization that defies predictions of technology-enabled industry decentralization. However, the logic and implications of the rise of DAMPs diverges, in other respects, from non-financial digital platforms, as finance has long possessed an informational intensity and regulatory and organizational fluidity characteristic of the digital platform economy. Consequently, the digital platform model has mostly developed endogenously in asset management through incremental innovation by major financial firms-in a process that has reinforced the position of leading incumbent asset management centers, and above all New York-rather than being introduced from the outside by upstart technology firms and clusters." [BlackRock's Aladdin] has within its memory a vast history of the past 50 years -not just financial -but all kinds of events. What it does is constantly take things that happen in the present day and compares them to events in the past. Out of the millions and millions of correlations -Aladdin then spots possible disasters -possible futures -and moves the investments to avoid that future happening. I can't over-emphasise how powerful Blackrock's system is in shaping the world -it's more powerful in some respects than traditional politics…But it's boring. And there is no story. Just patterns…It is the modern world of power -and it's incredibly boring. Nothing to film, run by a cautious man who is in no way a wolf of Wall Street. It's how power works today. It hides in plain sight -through sheer boringness and dullness." -Adam Curtis chain ledgers (Economist, 2018a;Swan, 2015).

New financial geographies of Asia

“…While Gemici and Lai (2019, in this issue) explore investment banking, the world of finance has witnessed the growing power of asset management companies, which exercise their influence through their expertise and the sheer size of asset they manage on behalf of institutional and individual investors, with Blackrock, for example, managing nearly US$6 trillion. Industry reports suggest that while Asian countries host many large institutional investors, including sovereign wealth funds, there are few large asset management companies in Asia outside of Japan (Haberly, Duncan, Michael, & Dariusz, 2018). However, with growing wealth in parts of Asia, with China in the lead, we could expect the growth of asset management to be a major trend over the next decade, and a significant factor shaping the financial geographies of Asia.…”

Towards an economic geography of FinTech

“…Over time, could we perhaps consider a shift from GPNs as a form of capitalist organization and accumulation towards global production platforms, in which user-generated data, algorithmic framings of risks and markets, and digital intermediation become not only a key source of revenue but also significant modes of control of production and consumption? Such a substantive debate is beyond the current scope of this paper, but some scholars are starting to engage with the concept of platforms and consider their theoretical implications for issues of value, rent, modes of accumulation and governance (Haberly et al, 2019;Sadowski, 2020;Zook and Blankenship, 2018), which will shape scholarly thinking on the spatial organization and uneven outcomes of economic activities. Research on the growth and development of IFCs also needs to consider more seriously the locational decisions of FinTech firms and institutions, how they intersect with networks of knowledge and clusters of innovation, and the forms of capital, regulatory and organizational structures that are integral to the evolution of IFCs.…”

“…Hendrikse et al (2019), for instance, highlight the challenges posed by FinTech to establish IFCs in the age of digital finance.Their detailed study of Brussels points to the emergence of a 'Fin-Tech-State triangle' with the strategic coupling of big financial institutions with small tech startups through specific actions of Belgian entrepreneurs and state actors. While this creates new opportunities for second-tier financial centers like Brussels, it also has the tendency to favor incumbent financial actors in colonizing the emerging FinTech space Haberly et al (2019). also shows how digital asset management platforms (comprising index funds and exchange-traded funds, robo-advising, and analytics services) are developed through in-house innovations by major financial firms rather than from external technology companies, which has reinforced the position of incumbent banks and fund managers.…”

Trends in the financial technologies development during the economy digitalization

“…California and New York are financial technology development centers of the United States. New York is one of the active centers of asset management based on the financial technology use [13].…”