FinTech Meets Risk: A Marriage Made in Heaven?

 

Introduction

 
On 1 September, about 125 individuals descended on The Trampery in Old Street to attend an event featuring presentations, a panel discussion and a series of ten lightning pitches from up-and-coming fintech firms. The event was sponsored by GFT, a consulting firm combining advisory, creative and technological capabilities with a culture of innovation and specialist knowledge of the financial sector to deliver solutions to financial institutions.
 
Speakers included Dan Globerson, Head of Risk Solutions, RBS; Ian Axe, Founder & Director of Axe Capital and Partner, Oliver Wyman; John Barclay, Practice Lead, GFT Risk and Finance Practice and representatives of AlgoDynamix; Onfido; squawker; Credit Benchmark; FundApps; Kantox; Personetics; ClauseMatch; Trunomi; and Algomi. The topic of the relationship between fintech and traditional finance is an area of increasing focus for PRMIA.
 

Discussion

 
Information technology is evolving rapidly, making more and better information available and available more quickly than ever before. A number of innovative young firms have spent time mulling how new technologies and new thinking could be harnessed to address previously intractable risk management conundrums such as how to evaluate credit quality quickly and accurately, how to get the most value out of stress testing and how to minimise settlement risk. This event aimed to examine how incumbent banks could benefit from developments in fin tech and what to look for in a fintech partner as well as give attendees an opportunity to hear directly from some of the most innovative firms.
 
Fintech is a term used to describe young, innovative firms that challenge traditional ways of delivering financial services to individuals, other financial institutions and firms. Many factors have combined to give rise to fintech firms. Chief among them are changing customer expectations, the result of continued exposure to technological change and innovation. Another important driver is growing regulation, which has increased the cost of traditional approaches to service delivery. As profit margins have fallen, new products and services – and new service providers – have proliferated. Technological innovation has given rise to explosive growth in data and created new opportunities for those able to gather, manipulate and interpret it.
 
Fintech companies typically offer either better data processing or improved ways of communicating. For example, some may be able to aggregate private, internal or public data in new ways to support decision-making. Others may also be able to create new ways of processing payments or executing transactions. Still others may be able to provide information to customers in new and more appealing ways.
 
Some of those innovations may help banks manage risk better. By aggregating data from a range of sources, banks may find they have more useful information for making risk decisions, such as whether or not to make a line of credit available to a business or an individual.
 
Working with fintech companies, which are often small and new, may be challenging for banks used to working with larger, more established partners. According to our panellists, fintechs can be most helpful in solving problems related to data aggregation, data processing and communications. However, working with them poses unique challenges. Banks need to be flexible when working with fintechs. They need to be willing to be partners rather than customers, working with the fintech to tailor the solution to their needs. Often, the key to success is the strength of the personal relationship those involved develop. Obviously, as fintechs are small and new, some fail. Successful banks give thought to what would happen to any intellectual property in such an event.
 
Building support internally to work with a fintech can also be a challenge. Objections range from lack of familiarity with the solutions offered by fintechs to fears over its ability to complete the job. Innovation teams can be allies in the effort to persuade others.
 
The following firms gave lightning pitches:
  • AlgoDynamix, which detects disruptive events in global financial markets, anticipating price movements hours or days in advance. Contact Dr. Jeremy Sosabowski (jeremy.sosabowski@algodynamix.com).
  • Onfido, which delivers next-generation identify verification and background checks to help businesses across the world verify anyone, anywhere. Contact Niamh Cassidy (niamh.cassidy@onfido.com).
  •  Squawker, which provides a trading platform to help banks trade illiquid securities by identifying pools of liquidity. Contact Chris Gregory (chris.gregory@squawkertrading.com)
  • Credit Benchmark, which  provides credit risk estimtes on a comprehensive range of entities, including countries, banks, corporations around the world, through a contributed data model that harnesses the collective intelligence of the world’s leading banks. Contact Joshua Jian (joshua.jian@creditbenchmark.com).
  • FundApps, which helps asset management companies monitor and comply with filing requirements across more than 85 countries. Contact Andrew White (Andrew@fundapps.co)
  • Kantox,  whose “Dynamic Hedging” solution helps companies manage their foreign exchange exposures automatically and so better manage risk. Contact Philippe Gelis (philippe.gelis@kantox.com)
  • Personetics, which enables financial institutions to empower their customers with  real-time personalised guidance to manage their finances. Contact Russell Prince-Wright (russell.pw@personetics.com)
  • ClauseMatch, which helps individuals collaborate more effectively when creating, approving, publishing and analysing documents. Contact Andrey Dokuchaev (Andrey@clausematch.com)
  • Trunomi, which enables bank customers to control and share their identity and other personal data securely. Contact Anna Mazzone (anna@trunomi.com)
  • Algomi, which enables banks and asset managers to identify the  bond trading opportunities and then execute them efficiently and discreetingly. Contact Tim Binnington (tim.binnington@algomi.com)
PRMIA London would like to thank all the panelists and the sponsor GFT for making this event possible.