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The fifth annual WIRED Money conference explored the future of the changing finance sector through the eyes of those who are leading the way. The audience learnt about the big ideas driving new insurance models and understanding global financial risk as well as the impact of AI and the future of banks. Meet the people who are changing the future of FinTech.
Daniel Schreiber believes the insurance industry brings out the worst in people - so he has developed a model to change that. “It is not the hacker from Moscow that worries insurance companies, it’s their own customers,” said the CEO and cofounder of Lemonade - a mobile based startup that simplifies the process of insurance claims. The app uses algorithms to process claims, it can make decisions more quickly for less money and a flat fee is taken out of its customers’ monthly payments that is used to pay out on claims. “You can get insured in seconds, and get your claims paid in minutes. Insurance shouldn’t be more difficult than that.”
The best way for the financial sector to protect itself against the next big market crash, is not to study the past or to try to predict the future, it’s reacting to the present as quickly as possible. Jeremy Sosabowski is founder of AlgoDynamix, which collects data about its client’s behaviour and sounds an alarm if a group of them, who are otherwise unconnected, start behaving the same way. This could signify the beginnings of a potentially dangerous trend. “We have never seen a Brexit before, many of these events we have never seen before - the answer is not in historical data... Just look at what other people are doing - that is your answer,” Sosabowski told the main stage.
Andrew Brem, the chief digital officer at the UK’s largest insurer, Aviva, champions the new wave of simplicity in insurance - where data is key. “We’re building a data engine internally... we never want to have to ask you another of those tedious questions. We give you the very best offer, personalised to you based one what we’ve figured out about you.” Aviva has around 33 million customers across 16 countries, and Brem says the company’s objective is to build a product that is totally frictionless. For fintech companies, Brem tells the WIRED Money audience that new innovations are coming from China and Asia and the markets should be watched closely in the coming years.
John Fawcett told the main stage audience that while there’s enough big data to help predict crises and the technology there to support it, there’s a lack of talented people who can use the information to develop the necessary strategies. Since the 2008 financial crash, the talent has flocked to the tech industry - now the finance industry needs to find a way to tap back into those skills. Fawcett founded Boston-based Quantopian in 2011, which provides a platform for developers to test algorithms for free. It removes the middleman - giving individuals access to data sets and toolsets, free from institutions. “Even though this field of quantitative finance exists and even though it is all about automating decision making, the bottleneck in the creation of investment strategies is people,” he said.
Innovators like Arvind Krishna, senior vice president and director of research at IBM, want to use technology like the blockchain to improve global trading. The blockchain itself is a decentralised electronic ledger, with duplicate copies on thousands of computers around the world. It cannot be altered retrospectively, meaning authentication and ownership is easier to certify and less vulnerable to fraud. “For the first time with blockchain, we have a way of a transaction happening where both people can trust each other."
Joern Leogrande, executive vice president of mobile services at Wirecard, examines how AI can be used to make accurate predictions about customer behaviour in real time. Wirecard’s goal is to create a credit scoring system for brands and retailers based on customer data - not just in the shop but before and after they leave as well. “The payment transaction is something that is very sturdy, even with things like Uber - there’s a transaction behind that and we know something about you,” he told the WIRED Money audience. “Everything is happening in the background and the users of smart data will be a common thing in the next two to three years.”
Known as the father of AI and scientific director at Swiss AI Lab IDSIA, Schmidhuber said that Long Short Term Memory recurrent neural network learning will be crucial in the near future as computers will be needed to make predictions that are not easily seen by humans. “Systems that have been used since the 1990s learn from experience to become better prediction machines. These use neural networks to predict behaviour and financial indicators. The hope is you have a system that works better than those of your competitors and detects patterns that the others don’t see,” he said.
A new wave of branchless banks are challenging the traditional institutions in design, ease of use, and solving customers' day to day issues - like forgetting to touch out after exiting a train station. Tom Blomfield, CEO of app-only bank Monzo, told the main stage he’s trying to make banking simple by getting the basics right. “The big banks are stuck. They’re trying to do the user experience, they’re trying to do the brand, but they’re not very good at either of them, because their systems are holding them back,” he said. Monzo was valued at £50 million after an autumn 2016 funding round of £4.8 million.
Valentin Stalf, who cofounded Berlin-based digital bank N26, has managed to grow a digital first bank and has secured partnerships with MoneyBeam, Mastercard and TransferWise. The company now operates as a fully licensed bank but puts user experience at the forefront. Stalf told the main stage the company is reinventing the financial products that banks offer, while still providing them - from credit loans and savings accounts to everyday transactions. “Two years ago the questions was - are customers willing to put money into a challenger bank? What we’ve proven is that it's possible to build a bank from scratch,” he said.
App-based mobile payments are changing the face of sectors like retail. Sarah Harvey, UK lead at Square, which makes transparent and easy-to-use payments tools, said that especially while Brexit terms are negotiated, it’s vital that bricks and mortar retailers are able to take payments without having to shell out on expensive hardware and software. "One of the biggest challenges for small businesses is the growth of online commerce. Small businesses want to start moving to an omnichannel world where they can compete with their online rivals".
CrossLend is seeking to reshape the EU’s lending economy by enabling the free flow of capital within Europe via single-loan securitisation and creation of a European debt exchange. Bottenbruch says regulation needs to be looked at in a different way. “Now regulation of course is necessary, but the current regulatory framework is becoming a real burden for many banks,” she told the main stage. “Apart from causing unbelieveable cost in terms of legal compliance and everything, the fact that the regulators are trying to make the banks stronger and more resilient is a good thing. But, with increasing requirements on more capital and liquidity - that also really constrains the banks in giving loans, giving credit to the real economy.”
iwoca is a credit platform for small businesses that offers loans of up to £100,000. The company was the winner of the WIRED Money startup stage in 2013. He says big banks have failed to get ahead with their lendings services. “The reality is that financial institutions have failed to invest in technology to improve how they lend money to SMEs,” Rieche said. “As a result SME lending is a slow process and not profitable for banks.”
Eileen Burbidge is partner at Passion Capital, which has funded 63 early stage startups. She told the main stage that investment opportunities in FinTech companies will be on the rise in London - even with Brexit - and they will go beyond building consumer-facing apps, getting into the “unsexy bits” of banking – offering business-to-business solutions and innovating in the back-end.
When it comes to the new threat of cyberattacks, Alex Rice, cofounder of Facebook’s product security team and founder of bug bounty platform HackerOne, wants us to remain calm, but not to carry on as we’ve been doing. “Organisations should learn from previous train wrecks,” Rice said, especially as hackers' motivations are changing. “Hackers have a range of different motivations, many of them just want to protect it, like Marcus with his Wanna Cry. Many of them have curiosity about it, some of them want prestige and recognition, but increasingly, many of them want to profit from what they’re working on,” he said.
Ajay Bhalla has helped shape the new digital payments landscape by pioneering the development and use of biometrics and artificial intelligence to improve security for MasterCard customers. “We are going to enjoy the benefits of new technology, but it’s going to be a scary world if we don’t handle it right,” he said. Biometrics can secure data vulnerability in an insecure world, he told the main stage. “Vulnerability is part of life, but we need to have tech in place to manage this.”
While Taras Chaban, founder of market surveillance firm Sybenetix, says regulation and rules will not guarantee the prevention of another financial crisis. Sybenetix detects and investigates suspicious trading in a faster and smarter way by combining behavioural science, financial domain knowledge and machine learning. “Rules alone cannot prevent another case of market abuse or another case of financial crisis,” Chaban told the audience.
Suade provides technology for banks to ensure they are always compliant with regulation, with a focus on flexibility. By taking the time to understand changing regulations and developing technology that helps businesses comply, Suade hopes to save banks and financial institutions time and money. “It’s not just about regulation, it’s also about regulation that can be really adapted from a technology perspective,” Paredes told the WIRED Money audience. Within regulation there also needs to be standards, she says. And these standards should be built on existing financial standards: "This is not re-inventing the wheel".
Startups
Winner of the startup stage Curve, started out in 2015 to cut out the noise and disconnection in the banking landscape. The digital wallet platform is designed to connect all of a person’s financial services into one go-to place online, which is accessed with a Mastercard. It allows you to spend, see, and save money all in the one place without opening a bank account. CEO Shachar Bialick impressed judges by revealing a new service to be rolled out in the next few weeks. “We’ve identified that users sometimes don’t have the right card with them or sometimes not the right amount of money in their account so they’re using very expensive cards,” Bialick said. “But with Curve you can basically go back in time.” Pay with the Curve card anywhere in the world and within 14 days, if you change your mind, you can change the card which was charged, even after the purchase has been made.
Finimize has grown a community of 100,000 people. Each day, members receive a newsletter that digests the biggest finance stories of the day and why they should matter to them. Now, founder Max Rofagha is helping millennials get their financial lives on track my creating a Finimize MyLife platform that creates comprehensive, personalised financial plans in three minutes, free of charge. “We feel there's a big demand for people wanting to enhance their financial literacy,” Rofagha told the startup stage. “There’s 86 percent of millennials who save each month but keep 50 percent of their assets in cash and have no way to get financial advice.”
AgentCASH is an enterprise grade omnichannel platform that enables SMEs to sell and manage their products in real time. It works with brick and mortar stores using the mobile app, on their website using their payment form and through marketplaces such as Amazon. Cofounder Ante Kotarac told the startup stage: “We are not an ecommerce platform like Shopify. We are not a payment solution like PayPal. We are a platform that ties all of your payments, all of your inventories together so you can manage all of them from a single backend interface. So far we have 500 merchants using our platform and they’ve processed over two million payments.”
This article was originally published by WIRED UK
