Fintech start-ups take aim at banks' regulatory burden

The potential of fintech start-ups to address the technological and regulatory challenges facing financial services firms was evident at the fourth annual 3D Fintech Challenge Finals Day.

Held at Level39 at London’s Canary Wharf, Europe’s largest technology accelerator space for finance, cyber-security, retail and smart-city technology companies, organiser Dassault Systèmes promised the event would be “a showcase of collaboration for disruptive innovation”.

Thirty financial institutions gathered at meetings in Paris, London and New York to decide on the themes for the event and to pick the seven finalists from the 70 plus that applied.

“This year we have focused on addressing the regulatory burden through four themes selected by financial services leaders, experts and regulators, namely internal/external collaboration, simulation, data visualisation and a 360 degree view of the customer,” explained Guillaume Dufour, vice president financial services at Dassault Systèmes.

The finalists were each paired with a mentor from leading global financial institutions and undertook a seven-week programme before pitching at the finals day. Following a hectic afternoon of on stage presentations and speed-pitching demos to an audience of venture capitalists, private equity firms, industry experts and senior financial services executives, Kalypton, which provides modern software tools to transaction processing, was chosen as the winner. It will now receive additional mentoring and introductions to Dassault partners’ and the mentors’ networks.

“Our experience in highly regulated industries like life sciences and aviation has shown us that by partnering with the industry, coupling talented people and embracing digital technology, we can improve innovative outcomes to strengthen execution and increase efficiencies to enrich the customer experience,” added Mr Dufour.

Fintech is a broad concept, and the challenges and opportunities in the sector are encouraging a wide variety of individuals to turn their attentions to this most dynamic of areas. Among the techno-geeks and former asset managers that you might expect to find in these companies there was also an ex-experimental physicist and even a former chief regulator.

Although the start-ups were showcasing a wide array of technological solutions that the industry might want to consider, the same themes were evident in the majority of pitches. Utilising real-time data, the problems surrounding legacy systems and the importance of cyber-security were all oft-repeated phrases throughout the afternoon.

“We want to make IT in banking simpler, faster and cheaper,” said Patrick Stanton, CEO of Cyoda, a data processing and reporting platform which offers scalable big data technologies designed specifically for capital markets operations. The firm’s aim was not to build a data model based on today’s requirements, he added. “After all, today’s systems will soon be tomorrow’s legacy systems. We want to futureproof our system.”

Another finalist, WealthKernel, promised to enable traditional and new financial institutions the ability to offer digital wealth management solutions to their clients. "Not all established firms see robo-advice as a challenge; some see it as an opportunity and are collaborating with startups to unlock value and share expertise," said CEO Karan Shanmugarajah, formerly a portfolio manager at Barclays, stressing however that face-to-face interaction will always be important for customers.

WealthKernel's partners are able to adopt either a integrated version of its system, or software-only suite of modules. "We aren't a robo-adviser as such. If a robo-adviser is a cake, we are a supermarket selling the ingredients," added Mr Shanmugarajah.

The event was a good example of how old and new players can interact for the benefit of each other, he explained. "We believe startups and established firms have more to gain by working together than independently."

Amin Rajan,  CEO of Create Research and strategy adviser to leading banks and asset managers, was also in attendance. "The 3D Finch Challenge showcases the cutting edge ideas that are set to transform the finance sector in the next decade," he said. "The buzz, the energy and the excitement it generates is infectious."