Engaging Industry, Advancing Innovation

Fintech Continues to Spark Debate

By Mike Bodson, DTCC President & CEO | Jun 29, 2018

Mike Bodson (l) discusses the impact of emerging technologies with Ken Bentsen at SIFMA Ops 2018 conference.
Mike Bodson (l) discusses the impact of emerging technologies with Ken Bentsen at SIFMA Ops 2018.

At the recent SIFMA Ops Conference, I joined Ken Bentsen, SIFMA’s President & CEO, for a fireside chat on the top challenges facing financial services today. We discussed a wide range of issues, but fintech and distributed ledgers (DLT) remain the hot topic among many of our colleagues across the industry today.

During the conference, there was close to a dozen panels alone devoted to the subject of fintech, with many of them touching on DLT. As I listened to the debates throughout the week, two things became clear. First, there is still a great deal of enthusiasm for the potential of fintech innovations to transform how we conduct business, most notably in post-trade processing. As I mentioned to Ken during our chat, the work we’re doing at DTCC to re-platform our Trade Information Warehouse using DLT has further strengthened our belief in its value. However, many projects that were discussed were small in focus and scale, which made them not applicable to the needs of our client base.

The second point I heard consistently is that use cases with blockchain technology have run up against the realities of its scale and processing capacity limitations. We’ve experienced this in our work with the technology, and I suspect many in the audience have as well. A poll conducted during the conference revealed that 65% of attendees believe that any significant impact of the fintech revolution is still three to five years off.

Interestingly, while DLT garners the lion’s share of the attention, many in the industry – myself included – believe cloud computing will likely have a greater impact on financial services in the coming years versus other fintech innovations being used today. Ken and I spoke about this during our conversation, and I reinforced my view that what will be truly transformative is layering all these new technologies, including robotics and artificial intelligence, on top of one another to fundamentally reimagine how we process trades, manage risk and increase capital efficiencies.

While it will take significant collaboration, investment and vision to lead this type of change, we as an industry must remain cognizant that technology is a means to an end – and that end is to better serve our clients and the public interest. Importantly, we must always make sure that innovation is grounded in client needs and does not increase risk in the financial system. We must also be wary of one-off solutions that could lead to fragmentation of the financial ecosystem, an outcome which would negate the benefits that the new technology could deliver.  Over the past decade, policymakers around the world have enacted new rules to increase market stability and resiliency, enhance transparency and reduce risk. Now we need to engage with the regulatory community to share our knowledge and work with them on ways to incorporate new technologies while maintaining the safety and soundness of the financial markets.

There’s no doubt fintech is going to significantly impact all parts of the industry in the years ahead. Realizing the potential of these emerging technologies requires collaboration and discussion to ensure we are progressing at the right pace and always balancing risk and innovation.

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