May 24th, 2016 by: Grow VC Group

Markets always move toward greater efficiency, history has taught us that much. Technological advancements in computing power has been remarkable, but the growth and pace of development keeps on accelerating. Have you thought through the extent of the plausible impact of artificial intelligence (AI) and machine learning in the financial services market? Go ahead, try.

Cognitive psychology teaches us that humans are easily fallible as it comes to assessing the extent to which events are within their control. Humans also easily overestimate their own importance in the events that befall them and in turn underestimate the impact of factors beyond our control, such as timing, the environment and sheer luck. Are we over estimating our importance in financial markets? Without a doubt.

Financial services by volume has several interesting occupations, least of which is trading. However, if you look at the complex, though logical and information rich environment,s what exactly is defensible for us humans that we can actually hold on to? Are we of the opinion that a human is required to execute a complex hedging strategy? Are we wrong, and if so by how wide a margin?

AI and machine learning are still in early phase, but the practical implications with modern processing power continuously increasing is phenomenal and unprecedented. In raising these points in conversations with more traditional firms in financial services or market participants, a common dismissal is “We’ve been using the basics, a phone and a relationship for decades. It worked then, it works now” and debunks such as “I’m too old for those things”. Not only do these represent demeaning way of looking at some of the most promising technological advancements, arguably they represent a deep misunderstanding of just how fundamental this change in landscape is.

None of the current market applications in digital finance make use of real AI, despite what hype around robo advisor services may imply. But in the next wave of applications, we are going to be seeing new models unfold that will dwarf our imagination and displace tens of thousands of professionals into new capacities and capabilities. Like all change it will be uncomfortable and fought against, but try arguing the contrary point. Can you justify all the roles humans play in financial markets? Why are we relevant?

Read the whole article at Crowd Valley News.

AI fintech

Photo: Wikipedia.

May 22nd, 2016 by: Grow VC Group

The US Treasury issued an extensive analysis and commentary of the state of affairs in the most established sector within fintech, marketplace lending. This comes the same week as the founder and CEO is ousted amidst internal reports of misconduct within the pioneer and leader in the sector Lending Club. The week in the digital lending space has not been uneventful to say the least.

​To deconstruct the Treasury’s analysis, it would be unfair to point only to the concerns about marketplace lending as the report is comprehensive and broad. In it the Treasury details several positive trends and spillover effects of marketplace lender pioneers, such as the increased service offered to often underrepresented consumers, the efficiency in the underwriting and decision making process and the benefits of increased competition in an often brick and mortar dominated market.

The notion of caution was issued around the sustainability and stability of business models in marketplace lending, particularly as it concerns a novel and dynamic market that is still finding its long term footing. The Treasury noted how the macro environment these companies have grown up to and developed in, has consisted of largely previously anomalous conditions, low interest rates, a financial crash, on one hand a clear increase of requirements on brick and mortar lenders and on the other a push toward more transparent, efficient models in financial services. Its clear these conditions are not permanent and shifting the environment will have an impact on business models.

In our work with financial institutions and fintech pioneers, we often refer to three tenets of what the concept of digital finance builds on, that is efficiency, access and transparency. Looking at recent events, its clear these values are not to be left unchecked and they are not a given just because a service embodies a digital native presence. If anything else, consumers, partners and stakeholders should hold a spotlight to them rigorously to ensure that perceived transparency is not misused.

By detailing workflows and providing access to detailed reporting for market participants, can digital finance pioneers and leaders alike provide a way to further the conversation and develop toward optimal models that allow for learning in the market, but also keep the market participants abreast of events. We all have a role to play in the market and we should not accept the status quo at face value or the service we may get, but require and hold all participants accountable in the stride toward universal best practices that go above and beyond that of the the incumbent financial services market.

Read the whole article at Crowd Valley News.

US Treasury Department

Photo: Wikipedia.

May 19th, 2016 by: Grow VC Group

Kapipal (a Grow VC Group company) launched our new site in mid February. We communicated that old and new site will run in parallel for three months as we wanted to give our users time to finish their current projects and have a chance to get familiar with the new site. The new site offers many improvements and we are constantly updating new features to make even better. Now the three months has passed and we are ramping down the old site on May 19th after which you are unable to access it any more.

There is no action needed for the many of you who have already started to use the new platform – keep up the good work!

For those who don’t have active campaign on the old platform can easily start new one on our new site. Only thing to remember is your login details for old site don’t work and you need to sign up again.

There only small number of campaign which end date on old site is prior May 19. We have informed you via email. In case we didn’t reach you go to our migration guide for more information how to transfer your existing campaign to the new site.

The migration guide is provided to all who have questions about the transfer from old platform to new one. Kapipal domain remains the same and after ramp down you’ll reach our new site also from www.kapipal.com. As always, if you have any questions don’t hesitate to contact us!

Kapipal crowdfunding

May 17th, 2016 by: Grow VC Group

When citing the growth of the fintech market, its common to see indicators such as VC investments in the market referenced. However accurate these numbers are, 2014 and 2015 have continued a dramatic increase in the pace of investment. Another factor that’s often harder to quantify, is the adoption among the incumbents and established market participants in the sector but arguably its at least as indicative of a larger trend.

​In the past 12 months, we’ve seen participants embrace these new models, all the way from exchanges such as Nasdaq and OTC Markets, to banks such as Goldman Sachs, JPMorgan, BBVA, these established companies are rolling out their own agendas and plans in financial technology, from leveraging blockchain to deploying open APIs and competing head on in the p2p lending marketplace.

This comes at a while of a large technology overhaul within various financial services organizations, where we’ve had the pleasure of various conversations. An example of which was a recent discussion with a system administrator within a large banking conglomerate who had been brought in to oversee the winding down of existing legacy infrastructure. It was to be a few year project and now eight years later, its still a few year project. That being said, this trend is unmistakeable across the board and sooner or later, it will get completed either smoothly or more likely, through a series of at times critical system failures.

Another anecdote comes from a technical lead from a large financial services institution, in their lending department. In the process of getting details of how their collateralized business debt marketplace should function (the configuration process), our team lead asked whether we could piggy bank on the existing infrastructure for business information as it already exists. They are in fact a prominent lender and the client data they hold is remarkable. Her answer; the existing infrastructure is the last place they would look. With hundreds of legacy Windows 2003 servers haunting in the background, there was literally no way it would be a good use of anyones time.

This paints an interesting picture, one of large scale adoption and validity in the market that is met with the realities of existing infrastructure and its limitations. Navigating these types of particularities is a crucial part of the adoption process and through our work with our clients we have been fortunate to be able to assist in the creation of new ways of delivering services for the modern consumers. The trend and direction is clear, markets always move toward the greatest efficiency. The same is true in financial services. How else is the gap between the suit and tie wealth management banker and the millennial that doesn’t want to speak to a person going to be bridged?

Read the whole article on Crowd Valley Blog.

IBM Mainframe

May 15th, 2016 by: Grow VC Group

The London Stock Exchange (LSE) organized an investment fund conference in late March, with alternative finance playing an important role at the event. Funds and wealth management business has especially need to find more uncorrelated assets in their operations.

A question in the conference was, to discuss best models for investing in lending and other alternative finance platforms. One conclusion of a panel discussion on the topic was that ‘open-ended’ models don’t work properly with p2p loans. They also concluded that the US BCD (Business Development Company, similarities to VC funds) is a very problematic structure to use for p2p loans.

A larger mix of investors is still needed for the peer to peer market. It might require some new instrument models to get new investors (eg. private banks) to properly leverage and take advantage of this market. At the same time, more and more senior talent from the traditional finance companies are moving to p2p lending and instrument companies. One can argue that this means increased activities in that space.

Panelists were also asked, what are their favorite instruments to invest into in 2016. They listed some requirements and candidates for those instruments, for example, 1) they must be scalable and easy to understand, 2) new real estate based instruments, and 3) PRS (Private Rented Sector) investment instruments. They also believed the online and p2p lending sector has a huge opportunity now.

The markets development is still at a nascent stage, with significant growth to be expected for several years ahead as the market gains validity and volume. What the market needs is sophisticated participants with a long term view and commitment to developing these new models, pioneering new opportunities and setting benchmarks in the market.

Read the whole article on Crowd Valley Blog.

LSE fund investment panel

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