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I sat down with Bill Capuzzi, CEO of Apex, a company that’s built capital markets infrastructure to enable investing. Their customers include major global banks, Webull, eToro, SoFi, and a long list of financial institutions with $115B+ in AUM and 21 million brokerage accounts. In 2023 the company reportedly had over $400 million in operating revenue.
In this episode, we discuss:
The rise of retail investing and democratizing access to public markets
“It's not just about handing picks and shovels to people, but actually giving them the tools, the instruction manuals for the picks and shovels to actually properly invest.”
It’s no secret that 2021 was an unprecedented year for retail investing. This remarkable surge of main street investors was evident during a weekend in January 2021, when Apex opened a million new accounts in just two days. This growth was fueled by technological advancements that allowed for easy account creation and management, even for those with minimal investment funds. But with the market downturn of the following year, Apex witnessed a notable shift in investor behavior. As the markets became more challenging, there was a pronounced movement from active trading to passive investing strategies, such as robo-advisors, fixed income, or high-yield cash accounts. Apex responded to these shifts by developing solutions to expand access to fixed income.
While celebrating the industry's success in lowering barriers to entry and providing widespread access to investment platforms, Capuzzi acknowledged a significant shortfall in investor education. He pointed out that, although it was easy to make money in the bullish market of 2021, many new investors lacked a fundamental understanding of proper investing strategies which led to people getting hurt.
What you should keep in mind when building and selling enterprise-grade software
“It's tricky in the beginning, right? I go back to the early days of Apex. You're trying to win clients, but you should not win clients at the expense of following the rules, dotting I's and crossing T's and doing things the right way. Because eventually, it'll catch up to you.”
Being a leading custody platform provider means never cutting corners or crossing regulatory lines. This strict adherence to rules should be familiar to most fintech builders, but in practice this is hard. Companies developing enterprise-grade software, especially in sensitive areas like finance or healthcare, should remember that ensuring 100% compliance is not just a legal necessity but also a key selling point to large, risk-averse institutions like Goldman Sachs or JP Morgan.
Capuzzi reflects on Apex's early days, highlighting the temptation to win clients at any cost. He advises fintech startups against sacrificing compliance and proper procedures for short-term gains. Building a sustainable, reputable business in the tech industry, especially one dealing with enterprise-grade software, requires a long-term vision where adherence to rules and ethical practices eventually leads to trust and success. This approach not only ensures longevity but also builds a deep moat around the business, protecting it from potential risks and competition.
Bringing capital markets infrastructure to the 21st century and what he’s learned since joining the board of DTCC
“It's 2024 and the best we can do is still have to settle trades 24 hours later. Okay, it's good. It's better than what it was. It used to be T+5, by the way. But you're still talking about taking 24 hours to settle a pretty simple transaction, in a world where technology is amazing.”
Accelerating Trade Settlement Times: Bill highlights the ongoing efforts to shorten trade settlement times, moving from T+5 (trade date plus five days) to T+1 (trade date plus one day), and eventually to T+0 (real-time settlement). Despite the progress, he notes that settling trades even 24 hours later is outdated in today's technologically advanced world. The push towards real-time settlement is crucial for keeping pace with the rapid transactions and fluidity that modern financial markets demand. This shift requires not just technological advancements but also a change in mindset and practices among key market participants, especially the large banks.
Global Leadership and Standard Setting by DTCC: The Depository Trust & Clearing Corporation (DTCC) is taking a leadership role in this transformation. By moving towards T+1 and potentially T+0 settlement times, DTCC is setting a benchmark for the global financial industry. Capuzzi believes that DTCC's initiatives will not only modernize the U.S. markets but also influence other markets worldwide to follow suit. This leadership is essential in creating a more synchronized and efficient global financial system.
Addressing Cross-Border and Multi-Currency Challenges: Capuzzi points out the complexities involved in dealing with multiple currencies and time zones in global trading. As financial transactions become increasingly international, there's a growing need for systems that can efficiently handle currency conversions, time zone differences, and varied market practices. Apex, with its broad international user base, is working towards creating normalcy and efficiency in what Capuzzi describes as a chaotic environment. This involves developing sophisticated systems capable of seamlessly managing cross-border transactions and providing stability in a diverse and complex global market.
Bill’s take on the movie dumb money… and a lot more!
“Entertaining but Not Entirely Accurate.”
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Bill Capuzzi, CEO of Apex - Bringing Capital Markets Technology to the 21st Century