The FIA Technology Committee held their annual election and panel discussion in Chicago last week and for the second year in a row, the panel consisted of speakers from distinctly different disciplines that have recently been in the spotlight for financial technology (or “fintech”). Following introductory remarks from Rumi Morales of CME Ventures, the panel took turns weighing in on the tech trends of today from the perspectives of data analytics, cyber security, machine learning, and blockchain.
Morales led off with a broad overview of the state of fintech through the lens of CME Ventures, where she is CEO. Morales noted that they have invested in all of the areas discussed on the panel with a focus on technologies that look to bear fruit several years in the future. Of particular interest, were her words of caution for fintech. She noted that the average age of fintech companies in general is six years and this means that most of them have not operated in an environment of unstable or climbing interest rates, so bumps may be upcoming as market conditions inevitably change. Next, Morales emphasized that “frictionless” will not be good for everyone so there will likely be winners and losers amid the disruption. In fact, the semantic order may change entirely and we’ll be talking about the technology of finance rather than fintech. For example, we may one day buy equity shares from Amazon and pay our utility bills on Facebook.
FIA Fintech Transformation Trends Panel
The panel discussion was led by FIA Technology Committee President Brian Adams from Rosenthal Collins Group and featured Joe DeCosmo from Enova Financial, John Woods of RJ O’Brien, Neurensics’ Blake Hausladen, and Matt Roczak from Tally Capital and Bloq. In a round robin format, each of the panelists touched on the issues and challenges of change in each of their respective disciplines.
John Woods got the least amount of love as he discussed cyber security, which is not unexpected given that cyber security is not something that anyone would necessarily choose to spend their time and resources on, unless they were forced to (in this environment, we are forced to). He gave an interesting perspective on the cloud: he substitutes “someone else’s data center” for “cloud” and that helps his team determine if the function or data in question should indeed be done in the cloud or if it’s too sensitive to be “in someone else’s data center”. When asked from the audience about their guidelines for cybersecurity, Woods as much as admitted that even though they have generally followed ISO standards in setting policy and procedure, they have had to make much of it up because there is so very little guidance from regulators on complex and often contradictory regulatory mandates. In all, Woods gave a practical and nuanced look at the real world operations around cyber security.
Joe Decosmo is the Chief Analytics Officer at Enova, a leading provider of online financial services to non-prime consumers and small businesses, making he and Matt Roczak from Bloq the non-traditional members of an FIA panel. Enova has 12 years of experience with machine learning and data analytics and he cautioned that the current “glorification of the algorithm” isn’t backed up by their experience in building their business. It is his opinion that it’s important to spend as much time, if not more, on data sources as it is on models. Enova is fairly mature with regard to predictive analytics and their twin prioritizations in development are to improve the customer experience and produce more accurate predictions.
Neurensic is deploying artificial intelligence for trade surveillance and the point of view of Blake Hausladen, who is Managing Director of Customer Experience, complemented and, at times, contrasted with those of Decosmo. Neurensic is measuring activity against prior bad acts and taking a learning approach to monitoring and diagnosing compliance and surveillance functions. Neurensic has a broad base of customers for a young company, with everyone from trading firms to regulators on board as the functions and capabilities of AI led surveillance grow and develop. In all, Hausladen provided good insight on how an emerging company like Neurensic is able to make the best of new technology.
And then there’s blockchain. Matt Roczak has made over 20 investments in blockchain companies as the head of Tally Capital and Bloq and his involvement stretches back to 2012, a very long time when measured in blockchain years. Roczak has a strong belief in blockchain as an evolution of money and assets to the form of technology. Just as the telegraph was supplanted by the telephone and the telephone by the internet, blockchain will have a profound evolutionary impact on asset markets. The impacts will be profound over the course of 5 to 10 years with retailers (e.g.Walmart) and others being able to save significant amounts of money in their supply chain and, perhaps even more importantly, whole new groups will be able to create blockchain based markets for virtually any type of asset.
At the end of the day, the comments of the panelists further illustrated that the world of futures and derivatives has been unalterably transformed by technology and the pace and breadth of change is likely to expand and quicken as time marches on. It’s as true now as it was in the 5th century B.C.: the only constant is change.