Next Generation Financial Technology in the Ecosystem Econonmy
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Next generation systems will lead to an explosion in open access-based financial technology. Traditionally, fintech has suffered from a series of vendor lock-ins, preventing institutions from leveraging the flow of information coursing through the veins of finance. This is all about the change, with the deployment of core web technologies such as HTML5 and service oriented architectures. This presentation explores some of the emerging trends.
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Next Generation Financial Technology in the Ecosystem Econonmy
- 1. Spoilers and Spoils Emancipating fintech from vendor lock-ins Presentation at the New York Stock Exchange 17 June 2014 Chris Lamb @c_lamb
- 2. Legacy Impediments • Lack of cost pressures – fintech-enabled alpha drove exploding IT budgets for 30 years • Physical location mattered - trading venue oligopolies drove rich margins • Constrained information flow lead to economic rent for channels and distributors • State of the art technology demanded by sell-side and broker dealers • “Consumer” technologies not up to the task • Connectivity: latency delays and variability, lack of reliability • Standards-based desktop technology ineffective for real-time • Market data licensing restrictions: NYSE, Nasdaq, CME • Vendor lock-ins • Proprietary instrument nomenclatures, e.g. Reuters Instrument Codes • Closed communities, e.g. Bloomberg Messaging
- 3. What’s Changed • Cost pressures intense • Wall Street Margins collapsing: alternative venues, deregulation, decimalization • Maturing fintech markets - desktop and feeds market at $25B but growing at 3% Year-on-Year. • Location matters less – ubiquitous communications, alternative venues, dark pools etc. • As information distribution explodes, value declines • Increased information transparency • Pervasive information especially at retail level • Commoditization has moved power balance from channels to users • Improved Web and consumer technology • Able to disrupt proprietary approaches • “Good enough” for prime time
- 4. The New Landscape The Ecosystem Economy • Core Technology • Moving to open access & open standards • Consumerfication and webification • Moving to the cloud – lowers barriers to entry, faster innovation • Unbundling • Adoption of Service Oriented Architectures • Decoupled technologies working across APIs • Disparate data sets feeding customer workflows • Information • Content atomization • Commoditization
- 5. Enabling Technologies • Open financial frameworks • F2 - A framework to create multi-vendor, multi- asset class and multi-channel applications • OpenFin • HTML 5 – native support of multimedia, rich graphics over single socket exposed via Javascript interface • Open messaging protocols • Market data in the cloud • Bloomberg open symbology
- 6. Emerging Opportunities • Typical Innovator’s Dilemma factors • Underserved or new markets • Where inferior technology is good enough • Ripe for disruption • Mid-Office/Back Office • Enabling internal workflow within bulge-bracket firms • Feeding cloud market data to new processes • Buy-side, wealth management • Wealthfront, Betterment, Future Advisor – or their next gen cousins • Retirement applications integrating employer and other information • Mobile apps for retail investors
- 7. Example Companies Company • Xignite • Premise • Tech Investor News • OpenFin • qbeats • Transferwise Category • SOA-based market data • SOA-based retail data • SOA-based financial news curation • Secure HTML5 runtime container • Global market for pay-to-read content • Paypal for C2C Forex