DTCC Connection

Mar 20, 2017 • DTCC Connection

Big Picture Thinking: How to Navigate the Fintech Revolution

By Jim Binder

Big Picture Thinking How to Navigate the Fintech Revolution
(Left to right): Michael Bodson and Bridget van Kralingen

After a day of discussions featuring insights from industry thought leaders, technology experts and policy makers, The Depository Trust & Clearing Corporation (DTCC) Fintech Symposium 2017 closed with a discussion about how to navigate current and future fintech advances.

Lending their perspectives to the discussion were Michael Bodson, DTCC President and CEO, and Bridget van Kralingen, IBM Senior Vice President, Industry Platforms. Van Kralingen and her team are responsible for building a range of strategic business and technological capabilities such as cloud platforms and solutions. She has helped oversee the launch of two new opportunity areas at IBM: Watson Financial Services and the companywide mission for blockchain solutions, from research and development to go-to-market strategies.

Big Blue Evolves

Bodson began the discussion asking about the transformation that IBM has gone through over the past several years, including the acquisition of Promontory Financial Group and the work on Watson. Van Kralingen agreed that IBM was in the midst of a transformation, including some radical changes and critical continuity.

“Our underlying passion has always been about making the world of work better: more productive, more effective, and what we realized is that passion really hasn’t changed,” van Kralingen said. “From printing and tabulating machines at the beginning of 1910 to Watson, to cloud, to mobile -- all tools and technologies that make our clients more effective in serving their clients -- that passion didn’t change. What we had to do is get that to manifest in a very different way.”

As a part of that transformation, van Kralingen said IBM explored the regulatory and compliance space, which she called the most manual, most expertise-driven, most expensive area in financial services. “So it’s something that’s really ripe for artificial intelligence.”

Bodson said that the Promontory-Watson combo is a brilliant step. “However, human beings still, in some ways, trust other human beings’ judgment more than a machine, especially when there are millions of pages of regulation that are continuously changing. So I ask people, would they trust Watson?”

Van Kralingen explained why augmented intelligence is the way to approach it. “What we’re doing with Promontory - with regulations - is to take the best people in the field, train the computer, and then teach the computer how to sift billions and billions of sources of data, whether it’s images, voice, enterprise data, web data, proprietary data, case data. Then come up with hypotheses about what might be the outcomes.”

Blockchain Progresses

Bodson acknowledged that recent fintech innovations – cloud computing, robotics and artificial intelligence – have grabbed the attention of the financial services industry. He noted, however, that blockchain and distributed ledger remain front of mind and he asked van Kralingen to share IBM’s blockchain strategy.

Van Kralingen explained that IBM created an “end-to-end” blockchain business division which encompasses research, software and services. The model, she said, allows IBM to “really drive out to support our clients.”

Van Kralingen noted most clients – 90 percent – have moved from proof of concepts to blockchain pilots. She predicted that by the end of 2017, 15 percent of those pilots will be in production and that number will rise to 60 percent by the end of 2018.

Leveraging Fintech

Bodson moved the conversation to the broader issue of fintech and asked van Kralingen how firms can get the maximum benefit out of the gamut of technologies discussed during the symposium.

Van Kralingen surmised that the post-trade space is the place to watch. “My suspicion is that some of this cutting edge technology will go first into back office processes that can be shared and especially where the same activity is simply duplicated.”

As for the key points of navigating the fintech landscape, van Kralingen said, “Everybody will have to have a cloud strategy because it’s about speed of development and provisioning and setting up your organization.” She added that firms will need a big data strategy, “because there’s going to be a huge battle in this world about who owns your data and who owns data rights. Making sure you protect your company’s data and your client’s data, is going to be the battle for the next 10 years.”

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