On bond flexitarians and unfounded fears of jeopardizing existing (banking) relationships.
Companies can become bond flexitarians* in the future: issue plain vanilla bonds digitally, arrange special financing via the house bank. Thus, the fear of choice remains unfounded.
According to a study by the German Innovation Alliance, an association of leading manufacturers from the IT industry, executives see digitization as a tool for improving performance and a challenge in their corporate responsibilities. The study also examines psychological aspects of digitization: One concerns reluctance due to fears. These are greater in finance departments than, for example, at management and board level. A similar picture emerges when it is examined where digital alternatives meet with greater reluctance. Those who deal with financial issues tend to behave conservatively when it comes to changes in the wake of digitization, and not only according to this study. The development in the digital bond market is comparable.
Digital yes, but self-determined. Like after the pandemic in our personal behavior.
And how do we personally deal with digital changes? Surprisingly open and self-determined. The pandemic showed us that digital tools are a means to an end, making our lives and work easier. Here, too, however, the psychological moment must be considered: we want to decide even more self-determinedly when we exchange ideas via video conference and when we prefer to meet as a team in the office.
Behind this reluctance there is often fear. Unfounded fear.
Some might interject: "If you have a choice, you're spoiled for choice!". Of course, we must decide when to go digital and when to hold on to the old. Interestingly, the capital market tends to fall into a black-and-white pattern here. This is shown to us by the discussions we have had with issuers, banks and investors since Valyo was founded two years ago. These conversations are about highlighting the digital issuance process. But most of the time, they are also indirectly about fears. The fear of jeopardizing existing relationships with banks if the company issues digitally via Valyo. Unspoken, it is also about the fear of having to accept disadvantages, for example the reduction or cancellation of free limits for the investment of excess liquidity by the bank.
One thing is clear: such fears are often unfounded. Digitization in the issuing process serves primarily as a diversification tool. It gives the company greater independence and allows the market of providers to play better. As Valyo, we see ourselves as having a responsibility here: we not only have the tools that make it possible to execute a corporate bond issue securely, efficiently, and completely digitally - at 30 to 50 percent lower costs. It is also our job to address the fears that can influence a decision whether the com
Bond flexitarians love the digital way, but do not disdain the traditional.
After all, they don't want the choice to be agony. It is obvious that despite digitalization, requirements remain in the capital market. Complex bond issues are less suitable for digital issuance. Plain vanilla bonds are undoubtedly predestined for digital issuance. Particularly because in the Swiss capital market, vanilla bonds are predominantly issued.
We are convinced that we will see more bond flexitarians, especially in the Swiss capital market. Many factors of digitization speak in favor of this. Companies will also increasingly move digitally in the issuance process. And if they are planning complex, advice-intensive bonds, they will turn to the bank. We see this as a healthy market development. This is what we are working towards.
* The bond flexitarian is a company that covers most of its financial needs through digital issuance, but also occasionally chooses the traditional bank route, for example, when a complex transaction is pending.