Reviewing FinTech advances and new product entrants impact on the market

Reviewing FinTech advances and new product entrants impact on the market

By Alessia Falsarone, MD, Portfolio Strategy and Risk, PineBridge Investments.

Interview ahead of  Risk Americas 2019 

Risk Americas 2019 is taking place in New York City on
May 14-15  2019 – find out more here

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

In my current role as Managing Director of Portfolio and Risk Strategy at global asset management firm PineBridge Investments, I am responsible for strengthening the vision and strategy that drive risk evaluation processes across our credit platform in developed markets. Exploring commonalities in perspectives and catalyzing them into technical solutions is a key strength of mine. Not only it mitigates risks but also opens our platform to continuous learning and enhanced client retention. During the past several years I have overseen the integration of non-financial analyses in traditional investment processes including emerging trends in environmental, social and governance factors (ESG) with an eye on enabling financial returns and augmenting the investment value of our relationships through new product development. In my leisure time, I serve as a Stanford IGNITE start-up mentor and as a board member of an early stage consumer finance venture focused on developing an ambitious digital wallet.

What, for you, are the benefits of attending a conference like Risk Americas and what can attendees expect at the Convention this year?

In my view, the global community of financial risk and governance professionals is probably one of the most diverse in terms of the variety of skills and backgrounds it represents. Traditionally, we are tasked to map known (historically measurable) risks with a mitigation infrastructure that has been plagued by many technical misses over a short couple of decades. More often than not, we are experiencing how emerging risks are not necessarily originating in the “nodes” (the individuals) of the decision-making chain, as much as within the many layers of interactions that coexist among those nodes. Peer exchanges that cater to such a technical yet unchartered domain like Risk Americas are truly representative of the global risk ecosystem, the new vs. the old, the traditional vs. its most pressing alternatives.

Specifically, in the case of FinTech, our discussion will inevitably address the business value at risk that matters the most to a 2019 audience. While in prior years, that may have meant focusing on enhancing risk mitigation practices and infrastructure capabilities via automation, this year is likely to delve into issues surrounding the integrity of risk frameworks to drive transparency over those layers of interactions that drive decision making (from regulatory oversight to board level decisions and third-party data/systems’ partnerships).

You will be presenting at the upcoming Risk Americas 2019 to review FinTech advances and new product entrants impact on the market. Why is this a key talking point in the industry right now?

The long-term success of a risk management framework is driven by its ability to consistently map emerging patterns to measurable outcomes in an unbiased way. By addressing issues surrounding the preservation of firm value (economic as well as reputational) with the power of data science, financial technology has slowly started to redefine traditional lines of defense through one integrated, functional lens.

So far, we have witnessed the launch of a myriad of new platforms geared mostly to deliver upon key tenets of successful customer experience (from data collection and reporting to user profiling and targeted communication). One commonality is that they have the potential to be scaled across specialty end users in payments, wealth and asset management, and open banking almost seamlessly, thanks to the current regulatory regime, which focuses ubiquitously on protecting economic value and data assets on behalf of consumers, or on safeguarding competitive business practices. Yet the key talking point in industry at present is still on the topic of efficient execution as opposed to holistic process improvement. In fact, the most successful innovations are process-based and adaptable, built in modules, stackable yet easy to power off as a standalone where need be (such is the case for compliance breaches, cyber considerations or simply for maintenance and upgrade cycles).

What current regulations do you foresee impacting / have affected new products entering the market?

Regulations are proven enablers of innovation, by virtue of powerfully redefining both terms and conditions of financial complexity, drawing boundaries where there are none and shifting the focus from customer value to license to operate. To that extent, I see powerful outcomes from engaging with regulatory bodies on key generational changes affecting our industry.

If we put aside the Wall Street reform under the Dodd Frank Act of 2010 in the United States and the Consumer Protection Act that followed, all modernized regulatory frameworks are increasingly reflecting changing business models in terms of fraud and crime prevention – usually at times when financial stability comes into question. Outside of North America, countries that rely on the financial system as an engine of economic stimulus, continue to witness the emergence of lower cost and higher efficiency IT solutions to strengthen the financial footing of the incumbents as opposed to replacing them. For example, this is directly applicable to EU based businesses, where the issue of IT integrity is key to the success of the most recent data privacy and open banking regulations and have directed the attention of most innovators to redesigning the core of API domains from scratch to support banking giants lacking strong footing in digital strategy and customer retention to incorporate the use of smart contracts and identity recognition tools in their workflow.

What are the operational implications that need to be considered when new products enter the market?

A recent survey released by the Center for Creative Leadership points to 55% of executives from 65 countries saying their organizations lack the necessary skills to lead digital transformation at their respective firms. The operational roadmap that drives successful product launches for emerging technologies in the financial sector is no different from a traditional product launch. Except for two basic caveats: (1) know your regulator(s), and (2) at the board level, be clear on which internal teams are accountable for providing input on issues such as business conduct, reputational outcomes and operational failures. As such, equipping the organization with digital domain expertise along with FinTech fluency is a key component to achieve lasting operational excellence and early product adoption.

What types of new products do you expect to see or would like to see enter the market over the next 6-12 months?

In the near term, I would expect to see new product innovation that is partnership oriented, digital ledger based and designed in open architecture mode. In essence, the most successful products are likely to bring focus on either discovering the relationships within those organizational nodes I hinted at earlier or strategically enabling new ones. As corporate board assessment of risk aims at validating its strategic alignment with firm-wide growth targets, they cater to a new kind of leadership across businesses. That also entails a significant shift from inwardly organized lines of defense to outwardly focused as technology advances augment growth prospects across our industry. Effective communication channels will continue to be key in addressing reputational roadblocks at their early stage while those process-oriented and relationship-driven solutions gain the most acceptance and, consequently, better access to deployment capital.

Any views expressed are personal, rather than reflecting a particular company, board of directors, or media source.

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