In Fintech, An Inflection Point

September 19,  2018

WHEN IT COMES TO technology investment, especially in the securities finance industry, firms are laser focused on driving down costs, maximizing efficiency and keeping up with evolving regulations.

When most technology investment by firms these days is directed toward these must-haves, emerging technology that may offer a competitive advantage oftentimes takes a back seat. Technologies such as machine learning and blockchain are real and valid and exciting, and they have the potential to truly revolutionize the way we all operate, but in all likelihood they will be more slowly adopted by securities finance market participants than some of the buzz would suggest.

That said, a technology provider such as EquiLend is ideally placed to incorporate these revolutionary technologies into services already used by firms throughout the industry—such as DataLend, NGT, Post-Trade Suite (PTS) or EquiLend Clearing Services— allowing our clients to benefit from this cutting-edge technology with minimal to no resource and monetary spend.

In fact, we are doing just that. We are currently building enhancements to both NGT and PTS that leverage machine learning, and we expect to extend the technology to our other services as well. We are also actively working on cloud deployments as well as implementing a shared ledger model that can be easily extended to leverage distributed ledger technology (DLT) and “smart contract” frameworks in the future.

DataLend is a shining star of how we have implemented forward-thinking technology for our clients’ benefit. Since its inception in 2013, we have been thinking—and building—outside the box to develop tools throughout the DataLend suite of services that can help our clients gain a competitive edge through the richest data set in the securities finance industry. Examples include our options data-derived implied borrow cost module, our proprietary securities lending indices and our unique approach to peer group benchmarking, which has standardized performance reporting in our industry.

This is a true value-add for our clients. As with all of our services, we have always said that we will implement new features, small or large, as and when there is an appetite from the market to use them. Machine learning, shared ledger and other innovations are all examples of us listening to where our clients’ pain points are and building technology to alleviate them.

These are exciting times in the fintech space. I have been in the financial technology industry for more than three decades. I can count on one hand the number of true inflection points there have been in this space through that time: the shift from mainframe to PCs and client server; the advent of the Internet and the World Wide Web; the migration to relational databases; the proliferation of mobile computing; and now the movement to cloud-native platforms.

These were all very gradual paradigm shifts. In the future, I believe we will see more rapid technological change as new, disruptive technologies emerge.

Ultimately, as technology is revolutionized and reinvented, firms will be able to redirect their staff toward more impactful activities as human-machine collaboration becomes more important than ever.