Nordnet first in Sweden with electronic mutual fund transfers

The first electronic mutual fund transfer has been successfully executed in Sweden. The ambition is to pave the way for a new industry standard and to replace the antiquated system in which documents are faxed between banks and fund management companies. The ultimate objective is to reduce processing times by half, reduce the risks and increase efficiency.

Electronic fund orders are already practised by many Swedish banks and fund companies, but not electronic fund transfers. Nordnet wants to change this by becoming the first to automate the process. This is advantageous for clients who receive greater flexibility for transfers due to faster processing times. In the long run, Nordnet's objective is to completely replace the manual process in favour of automated digital processing.

"Nordnet wants to innovate the banking industry, including services which the clients do not see. Digitalising mutual fund transfers means faster processing times as well as increased flexibility and reliability. Today's savers demand a high degree of flexibility and the ability to move their savings without any delay, which until now, has been an ancient process in desperate need of modernisation. We hope this will lead to more of our fellow members in the industry joining the SWIFT network and digitalizing mutual fund transfers. It will benefit both them and the clients," says Eva Trouin, General Country Manager for Sweden at Nordnet.

Olivier Lens, Head of Funds & Investment Management, EMEA, SWIFT, says: "We are delighted that Nordnet and Fidelity have become the first players to automate fund transfers over SWIFT in Sweden. This is an important development for the funds industry in the Nordics region and globally. The automation of transfers will help take efficiency in the Swedish funds market to the next level, and SWIFT is proud to be helping these players to take a leading role in innovating to reduce risk and cost in the funds business, and to drive improved transparency for investors."

Nordnet transfers on average within Sweden 700 funds a month with an approximate value of 200,000 SEK per fund. It takes two weeks on average to transfer funds manually, depending on the speed of the counterparty.

A mutual fund transfer is done when a client wants to change the custodian of its holdings without selling, and thereby realising a profit or loss. Today, this procedure is done through faxing instructions back and forth in a chain between the banks and the fund management companies. The Swedish banks have thus far preferred to fax these instructions between each other, which is time consuming as it requires manual resources and creates risks with the manual handling of documents.

Nordnet and Fidelity conducted the first electronic mutual fund transfer by utilising a message type developed by SWIFT in cooperation with a consortium of fund companies including Fidelity. An electronic mutual fund transfer means that when the transferring bank has instructed a fund company to perform a fund transfer, it is executed immediately and confirmations will follow right after to both banks. Up until now, banks have faxed transfer instructions to the fund company, where the process halts for 1-5 days until the fund company executes the transfer and sends completed transfer confirmations to the banks. Once the banks receive the transfer confirmation, they update the receiving account's holdings.