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Tuesday, October 04, 2022

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Could AI-based digital platforms radically change people’s saving habits and defuse the pensions timebomb? Fahd Rachidy, CEO and Founder of Abaka, believes so

Ageing populations, growing at scales that have never been experienced before, are putting strains on economies across the globe.

In the UK alone, the Office for National Statistics estimates that, by 2066, the number of residents aged 65 or more will rise to 20.4 million, more than a quarter of the population. And here’s the rub: many won’t have properly planned or funded their retirements. In short, they are saving too little or, in many cases, not at all. And that’s not a problem unique to the UK.

A report by the World Economic Forum (WEF) estimated that the pensions gap in eight countries (Australia, Canada, China, India, Japan, Netherlands, the UK and the US) had reached $50trillion by 2015. By 2050 that shortfall is forecast to have widened to $400trillion.

“It’s a problem for the industry, for individuals, for pensions trustees, for employers, and it’s the issue we are fixing with Abaka,” says Fahd Rachidy, CEO and founder of the London-based artificial intelligence (AI)-powered retirement savings platform.

It’s not that governments are failing to address the problem. In the UK, for example, auto-enrolment into a pension scheme is now mandatory for every employee earning £10,000 or more a year. But wealth management business Quilter has calculated that millennials will still face a 60 per cent shortfall in the amount of money they receive compared to people retiring now, with a real-terms income of only £5,600 a year. Separate number crunching by the WEF forecasts that UK women will outlive their savings by 12.6 years and men 10.3 years.

The WEF acknowledges that the pensions industry must reform. An industry that still relies heavily on paper methods to do business has to change fast to encourage more people to save for their older age.

Cloud-based business-to-business platform Abaka is addressing the problem by making processes more accessible, quicker and easier, using what it calls Artificial Financial Intelligence. That includes conversational AI with which customers ‘share openly and honestly’ the information needed to develop advice and plan solutions – information they might be embarrassed to confess to a real advisor.

“There is clearly a need to provide experiences that are very similar to what people have when they are at home watching Netflix, or shopping on Amazon. We live in a world of hyperpersonalisation. To get people engaged, you need to provide them with instant answers to questions,” says Rachidy.

Abaka goes beyond pension management, although it improves that experience, too.

“With one click of a button, you can increase your contribution, switch your funds, consolidate your assets and transfer your pension. Making it a frictionless customer experience is really important, but we provide, through a range of intelligent nudges, an engagement that is holistic. We are helping people with their personal expenses, helping them to start saving on a yearly basis – for instance, to be able to buy a house – all in order to get them engaged in longer-term saving.

“Abaka is a technology vendor; we do not sell financial products. We help our clients better understand their retail customers, in order for them to get access to a more suitable investment product, for example.

“Working with a number of clients/providers, what we create is a platform where you have access to technologies and artificial financial intelligence in order to provide affordable and scalable advice when people need it.”

Rachidy has a successful track record in fintech. He was cofounder of Scientific Beta, now the leading European pension platform for smart beta indices with $40billion of assets under management. And he has big plans for Abaka in 2020, including expanding into overseas markets like the US, Canada and Asia, with offices opening in New York and Singapore.

In December 2019, the firm also secured a further $6.5million of funding with joint investment by Thames Trust, Ace & Company and Downing Ventures, to increase research and development, including in its AI platform.

“We are the only platform where providers can access technology across the world. Pensions in the UK are different to the US, which are different to Canada’s, etc. With our system, we can adapt the technologies for different markets and that’s really accelerating our growth.

Rachidy adds: “There is a massive opportunity to create better insight and knowledge around issues in retirement. Our goal is to help build a secure financial future for everyone.”

This article was published in The Fintech Finance Magazine: Issue #15, Page 93.
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