American startups are highly concerned with scalability, while Israel’s small champions prefer excellence within a specialty
Out-of-the-box models, explained Or Kremer, CMO of BeyondMinds, account for 80% of the work that goes into the development of an AI system. The remaining 20% of the process, which involves steps such as data cleaning and adjustment to fit specific risk profiles, takes up most of the time.
Mr. Kremer was speaking at the first Fin & Tech Talk, a series of four events TABF is holding to introduce bankers to international fintech ecosystems. This talk highlighted several Israeli fintech startups, and the series highlights leaders in areas including payments, cyber-security, automation, data, and other consulting services.
The American startup DataRobot, meanwhile, which participated in the second talk, takes a different approach from Beyondminds. Rather than customizing each AI, it adds an additional layer on top of existing programs to monitor their performance and maintain “humbleness” in their conclusions. One aspect of this process management is simply to monitor performance in real-time, as one would with a human staffer.
As a more subtle extension of the same approach, the dashboard also issues a warning in case the data starts to diverge too significantly from the training data – replicating the feeling that a human might get that something’s not right, even if a measurable problem has not yet appeared. A large portion of the distance from a rules-based application to one with true common sense can be bridged simply by recognizing the situations that are too complex to be analyzed in the usual ways, and deferring to other experts.
Rather than the 80% automation of Beyondminds, this approach seeks to automate 120% of the machine learning process – the model itself, plus a meta-model of the entire learning process. This difference in approaches may reflect different cultural outlooks, and also the larger winner-take-all market of the US, where scalability is a key criterion to attract early investment.
Security is about Relationship Management
Data science makes up just one segment of the diverse fintech ecosystem. The larger software sector (which itself has many parts) also has some areas of intersection with finance. The two talks that have taken place so far have highlighted the diversity of the fintech sector and the variety of technological upgrades that banks can explore.
Some of the participants in both talks work in the field of automation. Automation Anywhere adds a script layer on top of a variety of other programs in order to automate repetitive and low value-added tasks that might otherwise require minutes or hours of human labor. The Israeli company Glassbox visualizes the entire customer experience so that potential obstacles or errors can be identified as early as possible. These applications have much in common with other areas of the internet economy such as e-commerce.
Information security is likely to be a growth area in finance, as in other fields. The scope of the specialty is also changing quickly from a narrow, technical area of expertise into a broader matter of stakeholder management. Modern programming has generally solved many of the obscure bugs that appeared in early software engineering, but human operators remain just as a much a weakness as they ever were. At the same time, data is becoming social, so organizations must pay attention to information sharing not only within the organization, but to other entities.
RiskIQ representative Hans Barre noted that 75% of threats originate from outside firewalls. He also pointed to the social media identity of an individual or organization as an emerging attack surface. By impersonating others, rogue actors may be able to obtain information from associates, or simply damage one’s reputation.
Another firm engaged in stakeholder management was the Israeli startup The Floor, which has created a search engine for bank partners. Its Software as a Service (SaaS) business model positions it as a consultant to banks, but powered by a specific technology platform. Meanwhile, Scanovate, also from Israel, represented the burgeoning know-your-customer (KYC) outsourcing segment – another form of stakeholder management.
Payments Providers Contend for Control of the Universe
A large portion of the fintech sector is made up of payment providers, which often appear similar on the surface. Even companies that appear invisible to the end user must however direct their branding to some party. This choice creates a way to distinguish them.
Visa is one of the few payments brands that is a household name due to its consumer-facing marketing and history which goes back decades. Its Head of Product/Solutions and Deputy General Manager for Taiwan Eric Wang spoke about the company’s continuing efforts to facilitate payments through Visa Direct, including in some cases without a credit card. Visa is however an exception, which even challenges the definition of fintech because credit cards appeared so long before other payment technologies.
The other payment companies which participated in the talks have lower profiles – at least for consumers. Ripple is better known for its associated cryptocurrency XRP, which can be used as an investment instrument on the open market. The company itself is a service provider for financial institutions. Its ledger technology allows them to improve the reliability and coverage of their international transfers.
Stripe, in contrast, was started by software developers, and its main selling point is its simple APIs. Rather than banks or consumers, its services are marketed towards startups such as Uber and Amazon. Finally, Tradair works with brokerage houses and other clients to provide liquidity, exploring yet another clientele.
The talks took place at the Fin & Tech Village, a space for activities like training, workshops, and meetings near the National Chiang Kai-shek Memorial Hall, which TABF started in September 2018. “The mission of our village,” TABF President Hank Huang explained at the start of the Israel talk, “is to integrate the demand to solve the pain points of financial institutions, and then help them seek effective FinTech solutions.”
Next in the series, software companies from UK will share their experiences on August 20, and several payment-related firms from Australia will join TABF on September 10. With these four countries, the series will cover an important cross-section of the global fintech universe, not only in terms of geography but also business and technological models.
The changes that fintech will bring to the world will mostly be invisible, but this infrastructure will eventually be considered essential – most obviously payments, but also many of the other back-end functions that enable modern banking. Understanding the directions in which the sector is developing allows us to anticipate the future of financial services.
The next talk will be held on August 20 and will feature delegates from the United Kingdom.