24


“BANKS HAVE FELT


THERE’S LITTLE THE FINTECH COMMUNITY CAN ACCOMPLISH THAT LARGE INSTITUTIONS CAN’T”


DTH: RegTech seems to be the biggest area of excitement right now. The union of regulation and technology to address more complex legislation is in many ways overdue. The advent of MiFID II with a much more complex reporting structure is putting a great deal of focus on streamlining processes across financial services. RegTech players will be looking to add value in multiple areas from regulatory reporting to anti-money laundering, payment screening, and KYC – even capital management traditionally an investment function has RegTech implications these days.


People to watch in the space are Onfido for global KYC solutions and Fundapps for asset management RegTech.


IBS Journal: What are the biggest FinTech trends to watch in 2017 and into 2018?


DTH: RegTech seems to be the biggest area of excitement right now. The union of regulation and technology to address more complex legislation is in many ways overdue. The advent of MiFID II with a much more complex re complex legislation is in many ways overdue. The advent of MiFID II with a much more complex legislation is in many ways overdue. The advent of MiFID II with a much more complex reporting structure is putting a great deal of focus on streamlining processes across financial services. RegTech players will be looking to add value in multiple areas from regulatory reporting to anti-money laundering, payment screening, and KYC – even capital management traditionally an investment function has RegTech implications these days.


People to watch in the space are Onfido for global KYC solutions and Fundapps for asset management RegTech.


IBS Journal: Are there any new financial technologies that are over-rated?


DTH: There have been some worries about systematic risk www.ibsintelligence.com © IBS Intelligence 2017


created by new financial technology – the Financial Stability Board has spoken of P2P lending, robo-advice and changes in the payment systems as all being sources of worry in the future. But for me, a little observed part of the FinTech ecosystem may cause more issues. These are the High-Frequency Traders (HFTs) – despite little observation by the FinTech community – they generally have far higher R&D budgets than all but the largest players – and were using techniques from data science and AI well before they became the buzzwords they are today.


Regulators and academics are near consensus in the belief thathigh-frequency trading has cut transaction costs and improved market liquidity, as measured by bid-ask spreads and volumes. But market microstructure experts (including us) worry that this liquidity may evaporate in a crisis, i.e. abundant liquidity now could lead to a worse situation when liquidity is more of a concern. Unfortunately, until the next crisis we are unlikely to know if these concerns are unfounded.


IBS Journal: Where do you stand on blockchain?


DTH: Blockchain has managed to get people excited about operations, which in a reasonably lengthy career in banking is a first for me. However, the concept has lost a little traction over the last year or so with some concepts struggling to raise funding despite cryptocurrencies hitting new highs. One real positive is that the money spent on innovation has externalities above and beyond the creation of capital. We’re seeing millions pumped into the development of blockchain-based solutions to serve the unbanked across the developing world with tangible benefits for financial inclusion. The fact that these solutions are being developed is due to the interest in blockchain. Individuals lacking appropriate access to the financial system can gain a higher independence and better chances for welfare by creation of digital identity on distributive ledgers; you can be sceptical that a more traditional solution wouldn’t work better, but without the FinTech ecosystem no solution would emerge.


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