The ultimate way to move beyond trading latency?

Posted on : 29-03-2019 | By : richard.gale | In : Finance, Uncategorized

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A number of power surges and outages have been experienced in the East Grinstead area of the UK in recent months. Utility companies involved have traced the cause to one of three  high capacity feeds to a Global Investment bank’s data centre facility.

The profits created by the same bank’s London based Propriety Trading group has increased tenfold in the same time.

This bank employs 1% of the world’s best post-doctoral theoretical Physics graduates  to help build its black box trading systems

Could there be a connection? Wild & unconfirmed rumours have been circulating within  the firm that a major breakthrough in removing the problem of latency – the physical limitation the time it takes a signal to transfer down a wire – ultimately governed by of the speed of light.

For years traders have been trying to reduce execution latency to provide competitive advantage in a highly competitive fast moving environment. The focus has moved from seconds to milli and now microsecond savings.

Many Financial Services & technology organisations have attempted to solve this problem through reducing  data hopping, routing, and going as far as placing their hardware physically close to the source of data (such as in an Exchange’s data centre) to minimise latency but no one has solved the issue – yet.

It sounds like this bank may have gone one step further. It is known that at the boundary of the speed of light – physics as we know it -changes (Quantum mechanics is an example where the time/space continuum becomes ‘fuzzy’). Conventional physics states that travelling faster than the speed of light and see into the future would require infinite energy and so is not possible.

Investigation with a number of insiders at the firm has resulted in an amazing and almost unbelievable insight. They have managed to build a device which ‘hovers’ over the present and immediate future – little detail is known about it but it is understood to be based on the previously unproven ‘Alcubierre drive’ principle. This allows the trading system to predict (in reality observe) the next direction in the market providing invaluable trading advantage.

The product is still in test mode as the effects of trading ahead of the data they have already traded against is producing outages in the system as it then tries to correct the error in the future data which again changes the data ad finitum… The prediction model only allows a small glimpse into the immediate future which also limits the window of opportunity for trading.

The power requirements for the equipment are so large that they have had to been moved to the data centre environment where consumption can be more easily hidden (or not as the power outages showed).

If the bank does really crack this problem then they will have the ultimate trading advantage – the ability to see into the future and trade with ‘inside’ knowledge legally. Unless another bank is doing similar in the ‘trading arms race’ then the bank will quickly become dominant and the other banks may go out of business.

The US Congress have apparently discovered some details of this mechanism and are requesting the bank to disclose details of the project. The bank is understandably reluctant to do this as it has spent over $80m developing this and wants to make some return on its investment.

If this system goes into true production mode surely it cannot be long before Financial Regulators outlaw the tool as it will both distort and ultimately destroy the markets.

Of course the project has a codename…. Project Tachyons

No one from the company was available to comment on the accuracy of the claims.

Do you believe that your legacy systems are preventing digital transformation?

Posted on : 14-03-2019 | By : richard.gale | In : Data, Finance, FinTech, Innovation, Uncategorized

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According to the results of our recent Broadgate Futures Survey more than half of our clients agreed that digital transformation within their organisation was being hampered by legacy systems. Indeed, no one “strongly disagreed” confirming the extent of the problem.

Many comments suggested that this was not simply a case of budget constraints, but the sheer size, scale and complexity of the transition had deterred organisations in fear of the fact that they were not adequately equipped to deliver successful change.

Legacy systems have a heritage going back many years to the days of the mega mainframes of the 70’s and 80’s. This was a time when banks were the masters of technological innovation. We saw the birth of ATMs, BACS and international card payments. It was an exciting time of intense modernisation. Many of the core systems that run the finance sector today are the same ones that were built back then. The only problem is that, although these systems were built to last they were not built for change.

The new millennium experienced another significant development with the introduction of the internet, an opportunity the banks could have seized and considered developing new, simpler, more versatile systems. However, instead they decided to adopt a different strategy and modify their existing systems, in their eyes there was no need to reinvent the wheel. They made additions and modifications as and when required. As a result, most financial organisations have evolved over the decades into organisations of complex networks, a myriad of applications and an overloaded IT infrastructure.

The Bank of England itself has recently been severely reprimanded by a Commons Select Committee review who found the Bank to be drowning in out of date processes in dire need of modernisation. Its legacy systems are overly complicated and inefficient, following a merger with the PRA in 2014 their IT estate comprises of duplicated systems and extensive data overload.

Budget, as stated earlier is not the only factor in preventing digital transformation, although there is no doubt that these projects are expensive and extremely time consuming. The complexity of the task and the fear of failure is another reason why companies hold on to their legacy systems. Better the devil you know! Think back to the TSB outage (there were a few…), systems were down for hours and customers were unable to access their accounts following a system upgrade. The incident ultimately led to huge fines from the Financial Conduct Authority and the resignation of the Chief Executive.

For most organisations abandoning their legacy systems is simply not an option so they need to find ways to update in order to facilitate the connection to digital platforms and plug into new technologies.

Many of our clients believe that it is not the legacy system themselves which are the barrier, but it is the inability to access the vast amount of data which is stored in its infrastructure.  It is the data that is the key to the digital transformation, so accessing it is a crucial piece of the puzzle.

“It’s more about legacy architecture and lack of active management of data than specifically systems”

By finding a way to unlock the data inside these out of date systems, banks can decentralise their data making it available to the new digital world.

With the creation of such advancements as the cloud and API’s, it is possible to sit an agility layer between the existing legacy systems and newly adopted applications. HSBC has successfully adopted this approach and used an API strategy to expand its digital and mobile services without needing to replace its legacy systems.

Legacy systems are no longer the barrier to digital innovation that they once were. With some creative thinking and the adoption of new technologies legacy can continue to be part of your IT infrastructure in 2019!

https://www.finextra.com/newsarticle/33529/bank-of-england-slammed-over-outdated-it-and-culture

Will Robotic Process Automation be responsible for the next generation of technical debt?

Posted on : 28-03-2018 | By : kerry.housley | In : FinTech, Innovation, Predictions, Uncategorized

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All hail the great Bill Gates and his immortal words:

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

With the Robotic Process Automation (RPA) wave crashing down all about us and as we all scramble around trying to catch a ride on its efficiency, cost saving and performance optimising goodness, we should take a minute and take heed of Mr Gate’s wise words and remember that poorly designed processes done more efficiently will still be ineffectual. In theory, you’re just getting better at doing things poorly.

Now before we go any further, we should state that we have no doubt about the many benefits of RPA and in our opinion RPA should be taken advantage of and utilised where appropriate.

Now with that said…

RPA lends itself very well to quick fixes and fast savings, which are very tempting to any organisation. However, there are many organisations with years of technical debt built up already through adding quick fixes to fundamental issues in their IT systems. For these organisations, the introduction of RPA (although very fruitful in the short term) will actually add more technological dependencies to the mix. This will increase their technical debt if not maintained effectively. Eventually, this will become unsustainable and very costly to your organisation.

RPA will increase dependencies on other systems, adding subtle complex levels of interoperability, and like any interdependent ecosystem, when one thing alters there is an (often unforeseen) knock-on effect in other areas.

An upgrade that causes a subtle change to a user interface will cause the RPA process to stop working, or worse the process will keep working but do the wrong thing.

Consider this; what happens when an RPA process that has been running for a few years needs updating or changing? Will you still have the inherent expert understanding of this particular process at the human level or has that expertise now been lost?

How will we get around these problems?  Well, as with most IT issues, an overworked and understaffed IT department will create a quick workaround to solve the problem, and then move on to the myriad of other technical issues that need their attention. Hey presto… technical debt.

So, what is the answer? Of course, we need to stay competitive and take advantage of this new blend of technologies. It just needs to be a considered decision, you need to go in with your eyes open and understand the mid and long-term implications.

A big question surrounding RPA is who owns this new technology within organisations? Does it belong to the business side or the IT side and how involved should your CIO or CTO be?

It’s tempting to say that processes are designed by the business side and because RPA is simply going to replace the human element of an already existing process this can all be done by the business side, we don’t need to (or want to) involve the CIO in this decision. However, you wouldn’t hire a new employee into your organisation without HR being involved and the same is true of introducing new tech into your system. True, RPA is designed to sit outside/on top of your networks and systems in which case it shouldn’t interfere with your existing network, but at the very least the CIO and IT department should have an oversight of RPA being introduced into the organisation. They can then be aware of any issues that may occur as a result of any upgrades or changes to the existing system.

Our advice would be that organisations should initially only implement RPA measures that have been considered by both the CIO and the business side to be directly beneficial to the strategic goals of the company.

Following this, you can then perform a proper opportunity assessment to find the optimum portfolio of processes.  Generally, low or medium complexity processes or sub-processes will be the best initial options for RPA, if your assessment shows that the Full Time Equivalent (FTE) savings are worth it of course. Ultimately, you should be looking for the processes with the best return, and simplest delivery.

A final point on software tools and vendors. Like most niche markets of trending technology RPA is awash with companies offering various software tools. You may have heard of some of the bigger and more reputable names like UiPath and Blue Prism. It can be a minefield of offerings, so understanding your needs and selecting an appropriate vendor will be key to making the most of RPA. In order to combat the build-up of technical debt, tools provided by the vendor to enable some of the maintenance and management of the RPA processes is essential.

For advice on how to begin to introduce RPA into your organisation, vendor selection or help conducting a RPA opportunity assessment, or for help reducing your technical debt please email Richard.gale@broadgateconsultants.com.

 

Bitcoin – New Cash or New Crash?

Posted on : 28-09-2017 | By : Tom Loxley | In : Bitcoin, Blockchain, Finance, FinTech

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Much hype has plagued the media surrounding Bitcoin once again last week, this time concerning JPMorgan Chase chief Jamie Dimon. He made his comments whilst speaking at the banking conference in New York and his interview afterwards when he was asked his opinion on Bitcoin.

Having seen the actual interview during which his comments were made, it is my opinion that whilst there are some worthy and serious underlying issues which I believe he was justifiably correct in highlighting, the media has certainly sensationalised the content of what was said.

He has been famously quoted for making the analogy between Bitcoin and tulips. Referring to the mania that surrounded the perceived value of tulip bulbs in Holland in the 17 Century which caused the price rocket up well beyond their actual value. A Tulip was reported to be worth upwards of five times the cost of an average house, with obvious negative results. He capped off his ideas on the subject my making another reference to the famous Hans Christian Andersen short story The Emperor’s new clothes. Here (spoiler alert) mass hysteria surrounds the beauty of Emperors “new clothes” despite him being naked because no one has the courage or self-assuredness to argue against mass opinion for fear of being wrong or ridiculed.

It’s a clever and apt use of the metaphors. Even for someone who sees value in the disruptive effect of the cryptocurrency movement on the evolution of FinTech and the philosophy underlining (Bitcoins founder) Satoshi Nakamoto’s (Bitcoin’s founder) white paper, I can see the concern and won’t argue with the analogies.

However, if I was a sceptical man I wouldn’t be able to ignore that fact that, whilst Jamie Dimon’s credentials are fantastic and his opinion is highly regarded, the advent of Bitcoin (at its extreme) has the potential to shake his entire financial industry it to its knees. Therefore, it wasn’t surprising (even if well founded), when he stated, “If we have a trader that trades Bitcoin, I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous,”. Make of that what you will.

He may well be right, the general ignorance that still surrounds cryptocurrencies and blockchain (i.e. many people still see Bitcoin and blockchain technology as one and the same thing), coupled with a “jump on the bandwagon” mentality (and in some cases, a hint of greed) is seeking to over-inflate and undermine the intrinsic and true value of Bitcoin. Since its inception it has already undergone large dips in value, though it’s resilience to come back stronger is impressive.

Although it is not mentioned in many of the articles which cover the Jamie Dimon interview, he clearly states he does see a reason for Bitcoin, saying that “if you’re in Venezuela, Ecuador or North Korea you probably better off using bitcoin”.

He also states that he is not giving investment advice and that it may go much higher in value yet. His warning is that it will eventually burst because governments in first world countries like to regulate fiat currency and know who has it in their possession.

He stated that currently, governments consider Bitcoin a novelty, but eventually as it grows in popularity they will shut it down (however, how or whether that is even possible is a subject for another day).

Of course, it is worth noting a few points here which I believe are relevant. Initially, in his interview, Jamie Dimon uses the term Bitcoin as the subject of his conversation but then corrects himself and uses the more general term cryptocurrency. I bring this up because, as stated before, there is a still much confusion surrounding cryptocurrencies and blockchain technology (I will include a small glossary at the end of this article for those who want to know the differences and definitions). Many people still don’t (or can’t) yet differentiate between Bitcoin and the hundreds of other cryptocurrencies. It seems to me that what Jamie Dimon he really talking about at the conference is not Bitcoin per say, but cryptocurrencies in general, something which the general media has not seemed to pick up on.

Bitcoin has got a lot of bad press simply because it is the most recognised cryptocurrency (don’t feel too bad for it though because it has also rocketed in value for the same reason).

It’s also worth noting that what he is talking about is unregulated cryptocurrencies. Jamie Dimon’s concerns here are well founded. The sad fact is, that whilst the cryptocurrency remains outside any regulation and the outside control of any government-backed organisation it is likely to be exploited by criminals and those with nefarious intentions no matter how many legitimate users it has.

The technology could (and in my opinion probably will) be used by first world governments to create their own version of cryptocurrencies that are regulated and therefore have many of the benefits of cryptocurrencies, without the worry of destabilising the economy or causing massive inflation, which has been highlighted by the Bank of England (BoE) as a concern.

It may not be too long before you find yourself using the BoE’s “Crypto-Pound” or US Treasuries “Crypto-Dollar” to buy your weekly shop at the supermarket. Doubtless, many will argue that this would go against the whole philosophy of “Be Your Own Bank” that underlies (what some consider to be) the greatest asset of the current cryptocurrencies. However, it would solve the regulation problem whilst at least keeping some of the technical assets intrinsic to the technology (speed, transparency, efficiency, accessibility etc…).

The value of Bitcoin dropped substantially after the comments by Jamie Dimon. However, it bounced right back proving that although it may burst one day it still has a lot of confidence among investors and the growing number who are determined to make it a mainstream currency and it seems to be working.

Last week a London based property developer, The Collective announced that prospective tenants can pay deposits in Bitcoin. By the end of this year, it will also accept rent payments in Bitcoin too. A spokesperson stated that the decision was made after increasing requests from foreign customers. Also last week Last week, Lady Mone (British entrepreneur, global speaker, designer, innovator and parliamentarian) launched a major property development in Dubai, priced in bitcoins. She stated that the digital currency was a growing market that could not be ignored.

The world of cryptocurrencies is still embryonic and remains unclear as to how it will unfold, but it is certainly interesting to watch as a spectator, if not a speculator.

Glossary

Below is an informal glossary of some of the more popular terms in the Blockchain and cryptocurrency world, because of the relative newness of the terms here there are differing and often conflicting definitions available, however, I find these give an accurate (if very basic) overview. (The content of the definitions has been largely although not entirely, adapted from the information available at www.coindesk.com):

Bitcoin: Bitcoin is the first decentralised, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralised issuer. It has the following characteristics:

  • Decentralised
  • Transparent
  • Largely anonymous (Users hold bitcoin addresses, but they aren’t linked to names, addresses, or other personally identifying information)
  • Transaction fees are relatively small (although they are increasing gradually)
  • Transaction speeds are relatively quick (although large traditional financial institutions are now begging to harness blockchain technology to reduce their own transaction times)
  • Secured through cryptography

Cryptocurrency or digital currency: Also known as tokens, cryptocurrencies are representations of digital assets. Cryptocurrencies are categories of digital currencies. They consist of a type of electronic token with a perceived value, that is managed through limited entries in a database that no one can change without fulfilling specific conditions. Digital currency can be transferred between entities or users with the help of technology like computers, smartphones and the internet.

Blockchain: A blockchain is a shared or distributed ledger where transactions/data are permanently recorded by appending blocks. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain. The “chain” which connects block is often highly encrypted which makes the data stored in the blockchain highly secure and permanent.

Distributed Ledger Technology (DLT): Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not have to have its own currency and may be public or permissioned and private.

The tech company threat to financial services

Posted on : 31-08-2017 | By : john.vincent | In : Finance, FinTech, Innovation

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We were interested to read the update from the World Economic Forum in their August 2017 publication “Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services”. The report forms the third phase of work, started in 2014, into understanding the potential impacts of transformative new entrants to financial services, which fintech innovations were most relevant, the implications on consumers, existing providers, regulatory impacts and the infrastructure underpinning the future of financial services (such as blockchain).

Specifically, it considers;

  1. What are the innovations that have had the greatest impact since the report was commissioned?
  2. How have they changed the structure of financial services and how they are consumed? and;
  3. What are the broader implications for the sector?

At this point, it is important to note the contributors to the WEF report consist of a steering group and working group of senior leaders from mainly banks, insurers and payment providers, with some VC’s (largely at the working group level). That isn’t to detract at all from the findings, but is an important lens from which to consider the viewpoint (indeed, there are some points where the contributors are also presented as solutions to industry trend, such as “externalisation”).

So what are the conclusions? In a nutshell. whilst fintechs have so far failed to disrupt the status quo, they have “laid the foundation for future disruption”. In other words, we are still at the start of the beginning. No surprise really, given that whilst the barriers to entry in technology innovation have dramatically lowered, the implementation of there within the highly regulated, complex ecosystem of financial services has proved more challenging. Indeed, whilst changing the shape and approach to innovation has been a success, as well as raising the consumer expectation bar, the actual material changes have been largely periphery or improvements to existing infrastructures.

Whilst it is recognised that the incumbent players have responded to the pace of the fintech ecosystem, both by embracing startups and ideas, we don’t believe that this is as optimal as it could be. The report highlights that some firms have waited to see how new technology gain traction “before deploying their own solutions” is symptomatic of the issue. There is still an arms-length, protectionist attitude which pervades and is ultimately detrimental to the long-term business model of many financial institutions.

Of course, this is only human nature, and one might argue even more so in this particular sector.

The report cites 8 disruptive forces which have the potential to shift the landscape and competition in the coming years. Many of these are no surprise, from the power transferring to the customer interface (experience ownership) through to the reliance of financial institutions on large technology firms. The latter is something that we have written about a lot about over recent years, and we strongly believe that by accelerating technology partnerships and shifting delivery outside of the organisational boundaries, it would really benefit many financial services firms. Somebody will take the plunge and steal a march on the market…surely.

The report delves into the implications for different sectors (Insurance, Digital Banking, Lending, Crowdfunding etc.), what the end states might be and conclusions, such as in Investment Management the robo-advisors which are commoditsing the advisory value proposition whilst humans will still maintain a crucial role in products selection, particularly for high net worth individuals.

Let’s pick on Digital Banking though, just focus on a little. In this space the report highlights the importance of capabilities in customer-facing analytics and intelligence that are increasingly important from a competitive differential. Who are best at this, have a richness and, more importantly, a golden source, of data? The big four? The major insurance companies? Unlikely and, more importantly, the systems, people and processes are not going to change that in the short to medium term.

Given the conditions above, we are likely to see the usual technology companies that do excel in this space such as Google, Amazon, Facebook and the like (maybe Uber) chose to enter the market distribution of financial services products in the short term (see our prediction from 2011!). Whilst financial services firms establish technology partnerships with some of these tech firms, it is not a huge leap of thinking to have them pivot to providing competitive services very quickly. They have the data, the customer engagement, the brand, the scale and the capital to do this, plus the ecosystem of partners to plug any gaps.

Ah, but what about the regulators! From their perspective, we expect a softening of stance towards the distribution of products by tech firms, whilst having a close eye on the potential market dominance and systematic risk profile. In terms of the entrants, we already see technology easing the burden of regulation in the coming years, rather than employing an army of human beings, and the tech firms are again in the driving seat to benefit from this.

Maybe we are closer to “FaceBank” than ever.

 

 

5 (or 10) Minutes With Nektarios Liolios, Co-Founder & CEO at Startupbootcamp FinTech

Posted on : 10-06-2016 | By : Maria Motyka | In : 5 Minutes With, Finance, Innovation

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You were part of the fintech innovation before the phrase ‘fintech’ even existed – can you please tell us about your early ‘fintech’ experiences?

I was part of InnoTribe – a non profit initiative set up by SWIFT in 2009. We considered it to be our responsibility towards our members (banks and national institutions) to educate them about technology changes.

First, we initiated InnoTribe Sibos, the big thought-leadership conference and after that, little-by-little, we started introducing new things. We launched our innovation projects, looking at working with startups to build solutions for the community and set up the InnoTribe Startup Challenge – my baby, which started as an experiment. We talked to the bankers, the consultants, business providers… who we didn’t talk to was the startups. Therefore, we decided to organise a competition where the main prize would not be money or funding but access to the industry experts and knowledge base.

This was how I got into this and how my life started gradually shifting from being in a very corporate job within the industry to this beautiful space which operates between the corporate financial industry and entrepreneurship – Startupbootcamp Accelerator.

 

What is it like to work at Startupbootcamp? Which element of your work excites you the most?

I left SWIFT to work in fintech because I got really excited about working with entrepreneurs, who have a great vision and take risks to execute.

This environment is completely opposite to corporate life; you don’t see organisations taking many risks, you don’t see organisations executing fast. I find it hugely inspiring to engage with entrepreneurs who come with the most amazing propositions, seeing the ones who have the hunger to execute their vision, who know that as a startup you need to act fast, you need to be open to feedback…

The other side of my job that excites me is being able to have ‘my’ involvement in industry by doing things differently. Our programmes (Fintech and InsurTech) are funded by organisations, which understand the importance of innovation and have both the appetite and the capabilities to execute.

Working with banks and insurers who are smart in the way in which they approach innovation, who actually do not just talk, as many do, but DO – is actually as exciting as working with entrepreneurs.

nektarios

During your time at Startupbootcamp, the company launched FinTech programs in London, Singapore and New York, as well as an InsurTech programme in London – what are the key differences between the current state of FinTech adoption and FinTech opportunity in these metropolites? Which cities are next – do you have plans to launch programs elsewhere in the nearest future?

There are not that many differences between these cities. Across all of the programmes we don’t see as many payments innovations anymore, a lot of it is focusing on wealth & investment management, they all have the same startup ecosystem, the financial industry, a good pool of mentors to draw from.

Perhaps one thing worth mentioning about Singapore is that when we launched it, we were the first programme, the first FinTech accelerator and this was only 18 months ago! When you look at the landscape now there is about a dozen of them. This shows that the market is big enough and the appetite is big enough for there to be multiple initiatives.

New York is probably a bit more arrogant. Entrepreneurship, or at least the methodology, has originally come over from the US, so there is a perception of saturation, which actually does not reflect the reality. We still manage to attract amazing startups and partners.

We are working on three more programs and I can’t currently yet disclose the details but what I can reveal is that we are now also looking at some emerging markets/locations. We hope to launch additional programmes within the next three months if all goes well.

The New York issue opens up an interesting conversation…

What frustrates me is that people look at what FinTech accelerators do and compare them to traditional startup accelerators, working with e-commerce propositions or apps they could put on app store and which will sell the next day.

With FinTech it does not work like that. It is a regulated industry, you need to collaborate, your customers are the distributors. Therefore the key thing we are trying to achieve with accelerators is not so much to achieve funding for startups – funding happens if a startup is good. Our goal is to offer startups the opportunity to test and validate their proposition with a bank or with an insurer; they need to prove that whatever is built is going to be used. Starting a pilot during an accelerator programme and proof of concept are more important than raising a quarter of a million or half a million in so early stage.

In the US when you talk about startups in general success is measured by how much money is raised.

 

Over the last two months, Startupbootcamp FinTech team visited Tel Aviv, Dublin and Turin with the FastTrack tour. Could you please tell us more about the events and the initiative?

FastTrack is an initiative to attract startups to join the programme. These one day events are very informal and startups apply for them locally. We have put together a small community of great local mentors, with whom the startups can spend some quality time together and receive feedback to their business models – so there is value that is added to them. If we see a startup that we really like, we fast track it to the final selection. Right now our FinTech London applications close on 26th of June and we are looking for more FinTech startups to apply to find the best 10 hidden gems.

This is really for us to meet the founders in person. Everyone who works within this space will agree: the team is more important than the product. You need to meet the founders, spend some time understanding their vision, you need to see how ‘coachable’ they are, how open they are to feedback – all of this has an impact on how attractive they are to a programme.

What I find interesting is that sometimes, when we go with a fast-track tour to a certain location, it’s the first time anybody has put a FinTech group together. When we did the very first FastTrack in Beijing, about three years ago, nobody had been to Beijing before to talk about FinTech.

 

What needs to be done to build a stronger bridge between the startup community and the financial industry?

What we do very much focuses on that, this is really the key thing an accelerator does. I think that despite the few people who do something like us, there is still a lot of need for ‘translation’ – banks have certain assumptions, startups have certain assumptions and often there is nobody in the middle to have them speak the same language.

When we talk to the banks, we try to get them to understand that a startup cannot operate according to their requirements. When they say: We like what you do we’ll come back to you in six months, the banks need to understand that startups do not have enough money to last for six months. That is why they came to the bank now. Equally, if a startup has a first conversation, if they have a proposition and the bank says ‘I like it’, they also need to understand that even with the best intentions, a bank cannot start using a startup’s technology within the next two weeks, because of procurement processes and diligence – a lot of it is about understanding each other.

Another aspect is that there is a lot of nonsense in B2B to be frank about it. Banks often pretend to be doing something meaningful when they’re not. It’s crucial for banks to understand what they need -the value they will get from the startup innovation.

What they will see in the programme is not what will change the direction of a company. It is about experimentation, R&D. If they like a startup and run a proof of concept, one day it might be relevant for the bank. There is also the assumption that ‘we’re going to set up a fund, and do all things FinTech – this is a bit naive and just  the way it is presented to the outside.

 

Which tech innovation do you predict to be the next big thing? 

Everybody wants to know that and nobody really does! I think one of the things that is important is that because nobody really knows, it is about trying new things, seeing what works, where things don’t work.

Of course I will mention blockchain – everyone talks about it being the next big thing but no one knows how it might manifest itself. The underlying principle of this technology has great, transformational potential and slowly we’re starting seeing real propositions. Around 25% of the propositions we receive are blockchain-based. It is a large number, 80-100 applications per location. Out of these, if we are lucky, we might get 1 into the programme. A lot of it is noise, it is people being excited about the tech, but people who are not focused on solving a business problem (which is what a good startup should be doing). We however started seeing startups which are looking at more niche aspects on banks’ challenges and propose blockchain as a solution.

In the security space proxy voting is a big problem. It’s a process that hasn’t been touched by any kind of innovation for 40 years and blockchain is exactly the type of technology that can help the based proxy voting problem, yet no one offers such innovations.

Blockchain is exciting, bigdata is exciting. Yet who knows what is going to come tomorrow?

 

You are known to be a big shoe fan. How many pairs of New Balances do you currently own? 

I don’t have a precise number, I’ve got about 200 pairs:)

Featured Startup – 5 Minutes With Avtar Sehra, Crowdaura

Posted on : 26-02-2016 | By : Maria Motyka | In : 5 Minutes With, Featured Startup, Finance, Innovation

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In your view, which aspects of the financial services industry are the most likely to be revolutionised by the Blockchain?

Blockchain is being presented as a savior of the financial system, which a key focus point on clearing and settlement. However, there are many aspects of the trade-lifecyle process that are being either overlooked or ignored and some of those aspects are fundamentally much more of an overhead in terms of time and cost than some of the post trade activities. In addition, using current technology the post trade activity cannot be fully autonomised as smart contracts still need external scheduling services to trigger key Blockchain events, such as cashflows.

Blockchain capability and capacity will increase in terms of data security, storage and compute. As this takes place, the chain will become an increasingly fatter layer in the financial services trade life cycle technology stack. For example Crowdaura is already experimenting with instrument document structuring, pricing and execution on chain as well as looking at the obvious post trade activities. While we are focusing on simple debt, equity and swap instruments at the moment, we have our sights on much more complex products and deal structures.

We also believe that the current view of deploying a global Blockchain fabric for financial services is most likely an incorrect approach. We think a global finance Blockchain network will develop like how many other networks develop, such as the Internet. For example there are huge opportunities for driving greater efficiencies in the internal trade lifecycle from execution, trade capture to documentation, confirmation and other post trade administration and control activities. At the moment these internal trade lifecycle processes are stymied by inefficiencies related to transfer of data between systems and executing reconciliations and reporting, or trying to maintain unpractical or uneconomical golden data sources.

In Crowdaura we are already experimenting with deployment of internal operational chains, where our applications can plug into, and providing adapters to integrate in-house or third party applications into the chains. Eventually these local area chains will then be connected to wider areas chains through trusted internal “pegging” nodes, very much like how LANs connect to the Internet in a current enterprise environment. In this model certain internal functions such as confirmations, clearing and settlement, can then move from the internal to the external chain, whilst still maintaining data security and privacy.

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Crowdaura has recently been chosen for both the Fintech Innovation Lab (as the only Fintech startup in the lab utilising Blockchain) and the Microsoft Accelerator program – what made you stand out from competing startups?

Crowdaura beat over 300 start-ups to be accepted into the 6th Microsoft London Accelerator cohort, and over 600 start-ups to win a place in the Accenture FinTech Innovation Lab. We are one of the first Blockchain start-ups to be accepted into the Microsoft Accelerator, and this is because Crowdaura doesn’t position itself as a Blockchain company. We leverage a complex stack of technologies, with Blockchain being one of them, but our focus is to provide a best in class Financial Services offering.

We feel that Crowdaura is a glimpse into the future of investment/wholesale banking, as we bring together digital platforms, machine learning and Blockchain to enable large financial services firms to provide automated self-service banking to clients for securities lifecycle management. We want to help financial services firms do what they do, but more easily, cheaply, quickly and safely. This is achieved through automation of activities such as legal/regulatory document structuring; intelligent marketing, distribution, execution; and a Blockchain based clearing, settlement and administration engine.

What made us stand out is that we focus on developing technology for real world financial application. We look at a specific market, the business and operating models being used in that market, and then we try and build a minimal viable end-to-end system that enables frictionless execution within that market. We have many key services that are pre-developed, and most of these are web based (SaaS solutions), which can all be provided as a centralised “investment bank engine-in-a-box”.

However, the true power is leveraged in networks where exchanges can connect up with brokers, or banks with buy-side clients. In such cases we have developed a Blockchain engine, chain agnostic – meaning we can utilise the Bitcoin Blockchain, Etherium Blockchain, or any other blockchain and that can be leveraged for clearing, settlement and depository services, and executing Delivery Versus Payment (DVP) using fiat currencies. We are also experimenting with more on-chain functionality; obviously administration of coupons, dividends and voting are the easy wins. But we have a longer term vision connected with chains that have greater compute capabilities as we feel this is where the future is for truly distributed markets.

Could you share your experiences of working in an accelerator?

The London Microsoft Accelerator program itself has been steadily gaining momentum since launching three years ago, offering a select few start-ups mentoring, support and resources as they push their product through development and bring their offering to market. The accelerator culminates in a pitching event where VCs, Angels, and notables throughout industry assemble to view some of the finest start-ups in the UK and potentially offer investment.

Microsoft Accelerator (MSA) has been extremely supportive in helping us develop the technology side of our business whilst we were still in ‘stealth’ in the fourth quarter of 2015. With their help and support we were able to successfully win a place in the Accenture FinTech Innovation Lab as the only ‘blockchain’ startup in this year’s batch. Being part of the Accenture Fintech Innovation Lab is a great opportunity as it gives Crowdaura the opportunity to work with many of our potential clients in Investment Banking to refine our product and execute novel proof of concepts (PoC’s). So far it’s been exciting to network with different high-potential high-growth startups, share ideas, and discuss collaborative efforts in the future. There is also a lot we are learning from our start-up colleagues in the lab, they are all immensely intelligent and talented people running some incredibly innovative startups.

 

How should banks target technology innovation?

Posted on : 02-09-2013 | By : john.vincent | In : Finance

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We have written a lot about the pressures on financial service companies and how they are responding differently in order to adapt to these challenges (such as are the banks Too Big to Succeed?, how to manage Technical Debt and are they Missing an Opportunity with Bank Accounts). What we see is one common theme emerging – the need for banks, wherever they are, to continue to innovate in order to protect existing markets, build share in emerging ones and service their clients in a new more agile way.

“Innovation” and “Agility” are words too often scattered liberally in corporate life through mission statements and strategic objectives…a strap line or comfort blanket for C-Level communities. Box ticked.

However, do we really consider the practicality of applying these in today’s environment? Do we modify and target based on situation? Important questions. Let’s consider further.

If we look at the mature financial markets there are a number of external pressures which influence and inform our ability to drive technology innovation. Here we see Risk and Regulation forming a large part of the technology discretionary spend, up to 60% some estimate. This naturally has a big impact on the investment portfolio and how much can be targeted for projects in the innovation category. Indeed, the impact is often disproportionate as resources in the compliance area, such as contractors and consultants, are often sourced from the premium end of the market, thus further eroding what remains. This is something that needs to be addressed, quickly.

Another factor affecting the mature markets is the continued pressure on costs and internal resource burden. Even if funding for nurturing innovation exists, the staff that understand the business AND underpinning technology often cannot be freed up from the day to day fight for survival (an example of where this is being addressed is at Aviva with the creation of their “Digital Unit”).

Contrast this with the start-up communities located close to the key financial hubs…here funding exists to focus solely on the new future technology innovations, such as mobile payments, big data analytics and data science.

In response to this, the larger banks are engaging with the start-up community to drive new technology, such as through the Fintech Innovation Lab – a 12 week programme running through to March 2014. Shaygan Keradpir, CTO at Barclays, said “The increasing role of technology in financial services is accelerating the pace and breadth of innovation and driving the kind of cutting-edge services which our customers and clients demand.”

By engaging in this way banks are more likely to have an agile approach to innovation to combat both their market challenges and not insignificant legacy infrastructure (indeed, only recently Barclays lost their key mobile guru behind PingIt to real-time mobile payments start-up, Zapp).

Switching to emerging markets, a different approach to how technology innovation is approached needs to be considered. Here growth is a priority…in South Africa 67% of the population do not have bank accounts. This represents a huge opportunity to both on-board and drive innovative solutions in a different way. Indeed, Standard Bank has implemented a system with local stores acting as “access agents” to provide South African clients access to bank accounts for deposits, withdrawals and money transfers. They are currently opening at a rate of 5000 accounts every day.

Again in Africa, it is predicted that countries such as Nigeria, Kenya and Tanzania will be at the forefront of mobile banking and payments. In fact, whilst they have been under developed from a banking infrastructure and telecommunications perspective, this is expected be a benefit as competition enters the continent and drives mobile platform innovation without the burden of legacy investments.

It is interesting to watch how technology innovation differs from market to market and country to country. Awareness of this, targeting the innovation portfolio and truly understanding agility are key.

Technology Innovation – “Life moves pretty fast…”

Posted on : 25-09-2012 | By : john.vincent | In : Cloud, Data, Innovation

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We recently held an event with senior technology leaders where we discussed the current innovation landscape and had some new technology companies present in the areas of Social Media, Data Science and Big Data Analytics. Whilst putting together the schedule and material, I was reminded of a quote from that classic 80’s film, Ferris Buellers Day Off;

“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it”

When you look at today’s challenges facing leadership involved with technology this does seem very relevant. Organisations are fighting hard just to stand still (or survive)….trying to do more with less, both staff and budget. And whilst dealing with this prevailing climate, around them the world is changing at an ever increasing rate. Where does Technology Innovation fit in then? Well for many, it doesn’t. There’s no time and certainly no budget to look at new way of doing things. However, it does really depend a little on definition.

  • Is switching to more of a consumption based/utility model, be that cloud or whatever makes it more palatable to communicate, classified as innovation?
  • Is using any of the “big data” technologies to consolidate the many pools of unstructured and structured data into a single query-able infrastructure innovation?
  • Is providing a BYOD service for staff, or providing iPad’s for executives or sales staff to do presentations or interface with clients innovation?

No, not really. This is simply evolution of technology. The question is, some technology organisations themselves even keep up with this? We were interested in the results of the 2012 Gartner CIO Agenda Report. The 3 technology areas that CIO’s ranked highest in terms of priority were;

  1. Analytics and Business Intelligence
  2. Mobile Technologies
  3. Cloud Computing (SaaS, IaaS, PaaS)

That in itself isn’t overly surprising. What we found more interesting was looking at how these CIO’s saw the technologies evolving from Emerging, through Developing and to Mainstream. We work a lot with Financial Services companies, so have picked that vertical for the graphic below;

The first area around Big Data/Analytics is largely in line with our view of the market. We see a lot of activity in this space (a some significant hype as well). However, we do concur that by 2015 we expect to see this Mainstream and an increased focus on Data Science as a practice.

Mobile has certainly emerged already and we would expect this to be more in line with the first category. On the device side, technology is moving at a fast pace (in the mobile handset space look at the VIRTUS chipset, which transmits large volumes of data at ultra-high speeds of a reported 2 Gigabits per second. That’s 1,000 times faster than Bluetooth !).

In the area of corporate device support, business application delivery and BYOD, we already see a lot of traction in some organisations. Alongside this new entrants are disrupting the market in terms of mobile payments (such as Monitise).

Lastly, and most surprisingly, whilst financial services see Cloud delivery as a top priority they also see it as Emerging from now through the next 5 years. That can’t be right, can it? (Btw – if you look at the Retail vertical for the same questions, they see all three priorities as Mainstream in the same period).

That brings us back to the question…what do CIO’s consider as Innovation? Reading between the lines of the Gartner survey it clearly differs by vertical. Are financial services organisations less innovative? I’m not sure they are…more conservative, perhaps, but that is to be understood to some degree (see the recently launched Fintech Innovation Lab sponsored by Accenture and many FS firms).

No, what would worry me as a leader within FS is the opening comment from Mr Bueller. Technology and Innovation is certainly moving fast and perhaps the pressure on operational efficiencies, whilst undoubtedly needed, could ultimately detract from bringing new innovation to benefit business and drive competitive value?

There is also a risk that in this climate and with barriers to entry reducing, new entrants could actually gain market share with more agile, functionally rich products and services. We wrote before about the rise of new technology entrepreneurs…there is certainly a danger that this talent pool completely by-passes the financial services technology sector.

Perhaps we do need to “take a moment to stop and look around”. Who in our organisation is responsible for Innovation? Do we have effective Process and Governance? Do we nurture ideas form Concept through to Commercialisation. Some food for thought…