Fintech is about innovation and technology in the financial services but it has been like that for some time, and so what has really changed is the mindset, according to one panellist, at this year’s DTCC’s European Client Forum in London.
The panellist added: “Fintech revolves around a focus on leveraging all of the technology that is available. The main difference between an established player and a startup is whether the established player is able to accelerate and if they will be fast enough to meet the client experience.”
“A lot of the innovation in the industry is something that we have been able to do jointly, fintech is a mindset.”
Another panellist discussed their views on fintech, they explained: “We look at it as falling into two buckets: one, solving problems with the same solutions, and two, a way to add change and innovation. We break it up into those categories and we look at how to be experimental in that space.”
"We now live with a lot of technology that is quite dated—we [the industry] need to move more quickly. Many delegates here today have great ideas but only some would be considered to have key solutions that can really help us support our clients and industry in the right way. The solutions need to be agile.”
The moderator then asked the panel about the hype versus reality around fintech and asked where firms are spending their money and where firms are prepared to invest.
Responding to this, one speaker said: “We go through phases of [hype] but that’s not to say it’s a bad thing. The most hype has been around distributed ledger technology. People say that it is going to change the world. It still may change the world as people say it will but I certainly haven’t seen it do so yet. I would say that it has been overhyped.”
In terms of where money is being spent, the speaker said: “We spend money with startup firms, quite often this is outside our core processing; we look at spending on items that are not changing what we are doing but adding and enhancing to what we are currently doing.”
The speaker added: “We see analytical tools being used in a preventive way, we can use the tools to pick up trends and see what the problems might be.”
Another panellist commented: “Whether or not there is hype, I think this is a personal thing. Generally, we are susceptible around the interface of things: how it looks and how we can interact with it.”
“The importance around the underlying infrastructure is what really makes a difference and there is a growing appreciation for that.”
Looking at where the value lies, the panellist added: “Data architecture revolves around looking at the data that we have and looking at whether it is ready and structured to be used for a multitude of purposes. We are starting to look at businesses through a lens that tells you how effective your operation is, that can turn it into data insights, and I think that there is a lot of value there.”
Discussing costs, one panellist said: “Cost of a post-trade environment is too high. We collectively need to reduce that cost for all of us to remain competitive. This is the first time I have seen the collaboration of industry participants wanting to agree on standards.”
“The beauty of this is that it is non-competitive. If we look at a lot of costs generated there is a huge amount of reconciliation that exists, which means that the costs can really come out and that standardisation can let us reduce our risk.”
“One of the challenges is that even if we agree on all of the standards, the way to materialise that cost requires the market to move on mass in order to regenerate that.”
The speaker added: “We need to be sure that there will be a real market uptake on that solution. There is a balance here between collaboration and competition. The reality is clear in what is driving the cost. The hype is clear in who is providing the solution.”
The moderator then asked panellists if buy-side firms regard technology in a different way from broker-dealers, to this question, one speaker replied: “The main challenge for the buy side is the recognition that the pace that technology is advancing and is going at a pace which is too fast for our notion to keep up.”
“We haven’t yet solved how to vet, control, and realise the value quickly enough. So that is what we are working on right now—how to create new innovative solutions”, the speaker explained.
Meanwhile, another speaker noted: “We have common objectives. Both buy- and sell side focus on the risk and cost, certainly, in terms of the solutions, our objectives are often aligned. The dealer community will push the solutions and the buy side want to see a commitment from the sell side and they want them to follow through in addressing issues.”
Closing the panel discussion, the moderator asked what the future look like, and what is coming down the line that looks disruptive?
In response, one panellist said: “We have to work together to make sure that we go in the same direction. This is not a question about technology but a question about having forums and even more of a question about collaboration and engagement rather than technology and rivalry.”
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