JUNE 2019CIOAPPLICATIONSEUROPE.COM8IN MYOPINIONex Sokolin is a futurist and fintech entrepreneur focused on financial services. He works with investors, start-ups, and operators of large financial services firms to help them harness the potential of emerging technologies. Such themes include everything from artificial intelligence, blockchain and crypto assets, to robo-advisors and neobanks, open banking, insurance software, and other emerging ideas. Lex looks across industries, such as banking, lending, investing, and insurance, to tell robust data-driven stories about what the future of finance will come to be.Mental Model of DigitizationTo understand the macro trends of the space, it is essential to start from the beginning. Finance may appear complicated and multi-dimensional, but like any industry, it can be broken down to the basics. In the back of the industry are factories that manufacture financial products. You can think of these as the capital and human judgment required to underwrite loans, select investments, build asset allocations, or issue insurance. The manufacturing of a financial product is the heart of Finance. In the front of the house, there are "stores" that sell and distribute these products. They take the form of bank branches, financial advisors, or insurance sales associates. Any time a prospect sees an advertisement on the television or launches a bank's mobile app, they are interacting with the storefront of a finance firm. Lastly, the middle office connects the front and back through workflows. Generally speaking, this includes account opening, money movement, risk management functions, compliance, and a variety of other industry-specific operating procedures. Digitization is happening across each of these functional layers, and within each product vertical. Robo-advisors digitize the storefront of wealth management, and neobanks do the same for banking. Venmo is the storefront for payments. At the back-end, quantamental investment funds and AI-led digital lenders create new products. Regulation technology and robotic process automation make the value chain more efficient overall. For better or worse, unlike the pure tech industry, finance is not an attention aggregator but remains a product-first industry.LEX SOKOLIN, FUTURIST AND FINTECH ENTREPRENEUR, AUTONOMOUS RESEARCH LFintech at the Edge of TomorrowEvolution of Fintech ChampionsTo understand today's Fintech champions, let's go to the venture capitalists that fund financial services innovation. A mere decade ago, venture funding was a much smaller portion of overall value creation in the economy. If companies wanted to get liquidity and funding, they would go public on the stock market. Today, many more firms are choosing to stay private longer, with ballooning valuations. Second, the proportion of venture funding dedicated to financial services companies was less than 5% at that time. Consider that in most developed Lex Sokolin
< Page 7 | Page 9 >