Is the Future of Fintech Digitally Disrupted or Redefined?
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Is the Future of Fintech Digitally Disrupted or Redefined?

By John Finch, CIO, Refinitiv

John Finch, CIO, Refinitiv

What are the current market trends you see shaping the Fintech space?

This discussion depends on what we mean by Fintech. People often say Fintech and think about the startup, and clearly there is a startup element to this. As we talk about the startup world, we also think about what it's like being an established player in the financial services ecosystem. We’re seeing a lot of startups being able to operate in an innovative and agile way. They're bringing in new capabilities and disruption to the established order and are re-automating or automating existing processes. For instance, we often talk about regtech where we're seeing a lot of innovation around technology that can be applied to regulatory issues and indeed the Financial Conduct Authority.

Also, we see many organizations doing investment and innovation around the broad subject of cybersecurity— applying machine learning, artificial intelligence, big data analytics and so on to some of the problems in cybersecurity. As these capabilities are evolving and maturing and build out several capabilities they are getting more and more adopted within the financial services ecosystem and large banks. We're in play in the financial services, which makes Fintech startup type organizations that are using the cloud as their platform, a low total cost of ownership, and low total cost of entering a market. So it's easier for potential customers of the startups to consume their capability so that the Fintech startups have got essentially to get access to a lot of capability.

"Fintech startups are just coming up with a simple point solution. It's usually smart and easy to implement in theory, but often difficult for their potential customers to adopt​"

With all these transformations happening within the space the amount of data continues to grow exponentially. The cloud scale and the hyper-scale providers provide the ability to process large amounts of data quickly and inexpensively. And this again is allowing startups to be able to get their products out to market quickly. So we're seeing this at a mainstream adoption of cloud in financial services. Also, we're seeing the regulators being more and more open to the use of cloud capability. Thus, increasing amounts of data are leading to a lot of opportunities for startups and Fintech, and cloud computing is solving some of the computing and storage issues associated with large amounts of data.

Please elaborate on the challenges that the organizations will need to address related to Fintech space.

The banks, insurance companies, hedge funds all of the organizations have got complex and often aging infrastructure because they've been growing and have invested in product and technology down the years. As a result of the crisis in 2008, some of them have merged, and the regulators have taken a strong position with regards to the amount of capital the banks have to hold and so on. So the banks and the other big players in the financial services ecosystem are faced with a broad set of legacy technologies which are hard for them to change and costly to develop a new set of products.

Now the Fintechs’ I'm talking about are startups which tend to come with a point solution because they're in startup mode. Can see what they see as the potential gap in the market, or they see an inefficient process, and they come with a very specific narrow but deep type of capability. Think about the trading of derivatives or bond trading. If you think about being one of the customers of that with an established infrastructure, heavy regulation, and a whole set of complaints they have to adhere to; it's hard for Fintech startups to adopt such a revolutionary technology. For the Fintech startups to break through and serve customers is a major challenge because they've already got a very complex set of problems and often the Fintech startups are just coming with a simple point solution. It's usually smart and easy to implement in theory, but it's often hard for their potential customers to adopt.

And the other thing about the Fintech startups is they're not creating infrastructure in a broad range of capabilities. Again it can be quite hard for the startups to be able to sell into customers. There is then, of course, all of the cyber security challenges for the large financial services players. So they are spending large amounts of dollars to defend from cyber attack. Clearly if one of these big players starts to adopt startup organizations it may or may not increase their cyber risk exposure but they have to be very thoughtful about that. So the reason for telling the story in this way is it's hard for the startups to get traction into customers often. Now a lot of the big organizations, large banks, and some of the regulators are deliberately going out and providing capability to try and attracting Fintech and startups. Because there's a lot of innovation going on, and we all recognize that we want to learn from that innovation and potentially invest in its culture or going to buy some of the services. So one of the ways that banks are getting around this problem of adoption is they're often creating small groups, technology hubs, working groups where they are attracting techs. Some organizations are investing in startups, and in fact, Refinitiv has invested in a number of startups as a way of getting some of the technology.

What are the major tasks for organizational CIOs at this point in time? Is there any unmet need in terms of Fintech space that is yet to be leveraged from the vendors?

I speak to many CIOs of large organizations and institutions, to our customers, and also involved in the networks of CIOs and advisory boards. I do that have to try and experience how people are thinking about the challenges and challenges are relatively universal in financial services at the moment for the technologists. One of them is a lot of institutions follow traditional methods, large organizations are complex, and it's hard to adopt and manage through some of those legacy technology problems. Cloud and artificial intelligence are accelerating quickly, and we're all wondering what, how, and where to adopt it to take our cloud journey. There's a real pivot going on in terms of talent. So a lot of our customers and ourselves we've got great engineering staff, and it's a huge group of people we need to retrain those people educate them as we go from an on-premise custom built environment of ourselves to a more cloud open technology. Having talent is a big challenge that everybody is thinking about—how do we upscale and reskill our current talent base to lean into the problems of the future.

How do you see the evolution a few years from now with regards to disruptions and transformations within Fintech space?

But essentially here's how I think about this; one is there's going to be more and more data as it's on an inexorable growth path. So sifting through that data providing analytics, making it understandable becomes a more significant problem all of the time for everybody. So being able to process and handle large amounts of data, being able to help our customers understand and gain insight from that data is a considerable challenge.

I believe with the advent of 5G technology and beyond that probably 6 and 7G that hasn't even been invented yet there's going to be higher bandwidth and more connectivity. And I believe 5G is going to solve some of the challenges for the Internet of Things were chips are communicating with the other chips because there's going to be good bandwidth to enable them to do that. We'll get smarter edge devices. You could think of an edgy device as potentially a trading platform. I believe that distributed ledger (not blockchain as a distributed ledger) technologies will play a part in chips being able to communicate with other chips. For instance, a car ordering its own fuel or a car navigate into the nearest fuel station that's got a certain price and so on. This will create even more data that will fuel further expansion of the hyper-scale, and that will further accelerate artificial intelligence. We're going to get into a virtuous circle where intelligent devices and chips are communicating with one another and with that central cloud that will drive more innovation in the clouds, and that will fuel further innovation in artificial intelligence.

What is your advice for budding technologists in the Fintech space?

Spend your time learning from other people such as from having a conversation with customers, market participants, and technology strategists. And invest in some small proof of concepts, try out ideas, and allow them to succeed quickly.

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