Andy Myers, head of product at Proxymity, updates Lucy Carter on the company’s latest developments, problem-solving solutions and future plans
How does Proxymity make a difference to banks’ development of European legacy markets?
Principally, via the digitisation of something that’s very manual, risky, inaccurate and non-transparent. This transforms the offering that you can give to clients’ customers. Take a market like the UK, for example - before we offered Proxymity, there was no way to directly go from the company to an investor — it had to go through the whole chain. The company, with its agent, would send out a paper card, which would go to a local bank, who would type in the agenda and pass it on. We are going around the markets digitising that process, and it is easier to do it in some more than others. The speed and willingness to change varies.
The real difference we can make to a bank in a legacy market is delivering the first electronic and transparent disruption to the process, so it can be done faster and cheaper. For a lot of the banks’ customers, this process is a black hole. You put an instruction in, you vote at a meeting for a new chairperson, and that is the last you know about it. This is the case across European legacy markets.
The Shareholder Rights Directive II (SRD II) has not delivered what it set out to do. Proxymity is happily disrupting the market to say, “we have a solution that allows a digital highway to be created so that people can look down at both ends, in all European markets.”
Which markets are you finding to be most resistant to change?
They all are, in their own ways. Some of the markets have more complex processes. In Germany and Switzerland, for example, you have to register before you can vote.
There are dedicated systems for that registration which have been there for years, woven into the legislation.
In other markets, like Sweden, you need to go to the meeting in person in order to vote. If you are going on behalf of a shareholder, you need a power of attorney that costs hundreds of euros. In some markets, existing laws or processes are prohibitive to installing a neat electronic solution.
Without law change, or significant process change, you still must go through these processes and your digital journey ends. That is a challenge for us, as we adopt the markets one by one.
What developments have been made to the Proxymity Vote Connect solution this year?
We have been focusing heavily on onboarding new partners to the network. The thing that makes Proxymity better is more intermediaries connecting to the platform.
It is a network solution, and the more intermediaries, banks, issuer agents, companies and investors we introduce to it, the better our ability to enhance our capabilities.
We are owned by a consortium of banks. As well as investing, they agree to connect and use our services.
We have been connecting them with many markets, growing our network of connecting issuers, banks and investors.
We have also gone live in new markets. We introduced the Proxymity solution to Denmark, entered the Nordics this summer and went live in New Zealand.
We have also been conducting many pilots in other markets, working out how we get past those barriers to entry, and how we plug the technology in. We ask a company in the market and ask an insurer agent to work on the electronic solution with us, to prove it can be done.
You are never ‘done’ on developing the core product itself, of course. The user experience for the intermediaries to come into Vote Connect has moved on leaps and bounds in terms of the platform’s capabilities.
Speaking to Asset Servicing Times earlier this year, Proxymity shared plans to develop Proxymity Shareholder ID Access, a semi-automated solution designed for Tier 2 and 3 banks. How has this project progressed since then?
That is now fully in operation, and we have had many customers go live. Usually, if you are a bank, in order to use our shareholder identification solution you need to build an application programming interface or a connectivity point with us, and you need to invest in technology development, at least to feed us the information. We can then respond to companies’ disclosure requests, disclosing your shareholders on your behalf.
If you do not have technology resources, or the means to make that connection today, but you want to be regulatory compliant and have a way to answer to companies, Shareholder ID Access is a light version of this process.
You get notified via our platform, and can then feed the information in via the platform itself. If you upload it, you do not have to carry out technology development for now.
That has been popular with a lot of companies, including the smaller intermediaries of mid-tier banks, because they do not have huge budgets to develop this technology.
Proxymity is invested in by large financial institutions rather than owned by a single company. How does this structure change the way that the platform develops and evolves?
The vision of Proxymity is what these institutions have invested in, and being owned by them does not change Proxymity’s mission. They are very supportive of our journey and are helping us propel forward.
Having big issuer agents, central securities depositories and banks as our owners (who are also invested in using Proxymity) means that their data, customers and clout is behind us when we want to go into a market.
We have industry members willing to participate in pilots, and they want to move the needle with us. It is really powerful. These institutions make up many of the first users of the solutions for shareholder identification and proxy voting.
They also have a lot of expertise; they are made up of large teams who have hundreds of years’ experience between them. There is a wealth of knowledge. They also know what their pain points are, and how they and their customers want processes to be. When they are talking to customers, or getting requests for proposals, they are thinking about what would help them provide a next-level shareholder communications product. Their voices are important in the roadmap, and we have regular interactions with their shareholders and customers.
The challenge is the same as the benefit. Onboarding all these huge institutions at once is no small feat. They are servicing thousands of customers, so rolling out solutions to six of the biggest banks in the world is a lot to do at once.
Our main problem remains the amount of people who want to use our services. It has taken quite a focus from our team and the institutions to carry out the technology integrations required. That is still ongoing now, and there is a lot more we want to do with them. We spent a lot of time as a start-up trying to convince people to come onboard, and they have arrived. That is great, but it also creates a lot of onboarding and collaborative work with those huge organisations. We have grown substantially, and it has been a massive scale-up process.
Cyber security is a risk that continues to grow. Shareholder ID Access aims to improve cybersecurity for small firms by, for example, ensuring that emails are secure. What else does Proxymity offer to combat these threats?
We have had to invest heavily in this area. The data involved in this process is all very sensitive: personally identifiable information, names and addresses, identification numbers, share amounts. This is particularly relevant to our Shareholder ID product, where one’s identity is disclosed as part of the product.
We have a systems and organisation controls II (SOC 2) accreditation, which is orientated around cybersecurity vulnerability standards. We are running vulnerability assessments on a regular basis, where people are attempting to break the system and we are consequently getting reports on a regular basis. This is a process that will never end because every time that you have accounted for the latest generation of threats and problems, you are having to invest again. You need to keep moving. We have a dedicated team that covers this, and we are continuing to invest in cybersecurity, ensuring that, from a vulnerability standpoint, the data is given the utmost standard of protection.
If you want to onboard the six biggest banks in the world, their scrutiny before they share their customer data with us and use our services is intense.
There is a high level of due diligence needed to get approval to become a provider. Our policies, our standards and our cybersecurity protocols are of the highest standard that they need to be in order for these customers to even consider coming onboard. This is of critical importance and enables us to serve this industry.
Proxymity states that it “promotes enhanced ESG by improving communication between issuers and investors”. What other ESG-related pledges has Proxymity vowed to make?
Transparency is a big part of ESG. One of the struggles on both sides of the fence, whether you are an issue or an investor, is transparency with what is going on.
If you are a company, it is knowing your shareholders and how to engage with them. That is where products such as Shareholder ID or Vote Connect can help.
If you are an investor, knowing whether you are being given the chance to have your say, and knowing that it is going to be heard, and successfully delivered to the company, is really important. If you care about ESG and you are feeding data into the black hole with no real idea as to how it got there, that is a massive quandary.
The engagement between issuers and investors is key, and something that we facilitate. Via the tools that we provide the issuer, they can engage with their shareholders in a more efficient way. Often companies are receiving votes from shareholders two days before the meeting, by which point it is too late to open the dialogue and have conversations. We make the process much more transparent for both sides.
Another point worth mentioning is accuracy. There is always a danger that people are voting on each other’s shares, and that there are things happening that are not right ethically. Operationally, once you have so many people touching the information and it is going through a plethora of conveyor belts and machines, there is increased risk.
We take the share positions from the banks in the chain, and we reconcile them. Where there are breaks, we highlight them. Without Proxymity, and in some other processes around the world, it is not always as secure, in terms of how votes are collated at the end. Accuracy, transparency and engagement are the key features we offer.
What has Proxymity got planned going into 2023 and 2024?
In terms of what we can share, a big part of the mission is growing the network — getting more intermediaries, companies and shareholders onto Proxymity to expand our footprint.
Currently, we have a heavy focus on Europe, because of SRD II, and we have achieved a lot in this region. Now we can look beyond this continent, and there will be more information released about our wider activity at a later date.
Entering new markets is also a big part of the plan. We will offer Proxymity so that issuers and investors can use the technology outside of our current operations in Europe, the UK, Australia and New Zealand.
We also have new products coming out, with ESG a key focus. Next year there will be more information published around products we are developing in this area.
We will never stop enhancing the products that we offer. We have built an excellent client list. Our clients have needs, as do theirs, so constant engagement is required.
Proxymity plans to expand on the existing product set with next generations of the products for Shareholder ID and Vote Connect. We will never be ‘finished’; we are continuing to evolve.
