In the annals of dork-turned-cool, there is no fiercer competition for numero uno than the one between Finance geeks and technology uber-geeks. On one hand we have the numbers guys and on the other we have the, well, numbers guys.
Both emerged from the anonymous dark rooms in the back-office to the front covers of magazines which the public reads (i.e., not Wired or the FT, though, funnily enough, these have become much more mainstream in a classic chicken-or-egg case).
During this evolutionary process, a certain uneasy tension grew between said groups. Each became more and more entrenched in its silo, and begrudgingly accepted the other side's right to be opaque. In recent years, things changed. Trenches were filled in, silos broken and opaqueness demystified. Why?
Setting altruism aside, it's a simple case of evolution - constrains led to symbiosis.
Let's review and see how this match was made. Similar to any other relationship, there are 4 main steps, we'll start at the beginning.
Step 1 - Discovery (or "How did you catch my eye?")
From the Finance Side
The CFO looks at the top line, and then the bottom line, and then the top line again and realizes that in most cases, the net profit margins are around 9% (see RBC Capital Markets' Myles Zyblock breaking down S&P 500 net profit margins by sector). One doesn't need to have been a with Long Term Capital Management to figure out that it requires a massive increase in the top line to move that bottom line in any considerable fashion. Then the CFO looks at the expense side of the B/S and doesn't fail to see the 900 lbs gorilla there - IT. Any penny saved, is a penny net earned - why go for 9% return when you can go for 100%?
From the Technology Side
The CTO is confident that he has the smartest guys in the firm. And yet, whenever he attends board meetings, he seems to be marginalized as a service provider, and not a power-multiplier, as he should be considered. He takes a look around the room and does a quick calculation of cost/benefits of alliances. Operations, Administration, HR, Accounting are in the same boat, no luck there. On the other hand, Marketing, Sales, Business Development and kin are in a different world well outside his comfort zone. Then epiphany strikes - the other dork-turned-cool. She'll understand. They both rose from obscurity to greatness. There is a partnership to be had there.
Step 2 - Mutual Benefits (or "What Have you Done for me Lately?")
After a (very) short period of courting, both sit together to work on a win-win solution. Finance quickly learns to harness IT's automation and innovation to streamline businesses, while cutting unnecessary costs. IT professionals meanwhile gets a crash course in business from the guys who understand it inside out, and learn the age old adage - follow the money. No longer are they simply doing because they were told, now they can understand how to better prioritize 2 competing business needs and divine which buck will produce the bigger bang.
Both C-suite execs truly become more valuable and this partnership keeps yielding unforeseen benefits to the business as a whole, and to the two departments in specific. The IT folks start to get a much deeper understanding of how their labor translates into profits, and the Finance people find more and more ways to utilize capabilities that were always in their organization, but simply were untapped.
However, one more benefit remains that is the true win-win and the most striking.
Step 3 - Next Steps (or "It's a Boy/Girl!")
After a few years of this synergy, "helped" by 2007/8 crash which lead to more Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Read this Term and less room for innovation in large financial companies, a new creation comes to life - Financial Technology. Why not take all the benefits of this agnostic union, while stripping away all the legacy code and specificity to create a brand new industry?
Thus emerged FinTech - a happy marriage of Finance and Technology where gazillions of dollars meet oodles of innovation (seriously, Accenture's ad-nauseam quoted estimates are $6-8bn investment by 2018). Unhindered by a particular company's compliance, operational issues, politics and this-is-how-we-do-things-here-in-XYZ, the FinTech arena is full to the gills with smart people armed with smarter ideas that make huge splashes. Suffice to take a look at some of the recent competitions / conferences to see how technological concepts are taking the financial world by storm. It's hard to walk around in Silicon Valley (CA), Silicon Alley (NY), Tech City (London) or Tel-Aviv/Herzliya (Israel) without hearing the buzzwords - Big Data, BI (Business Intelligence), Machine Learning, Cloud
Cloud
The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing conc
The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing conc
Read this Term (storage/computing), disruptive technology this and revolution that (later article will be dedicated to bashing these - stay tuned).
Step 4 - Growing Up (or the feared "We Need to Talk")
While much has been said / written to glorify this nascent field, there is a need to keep a bit of the enthusiasm in check. First and foremost, every new field gets this halo of can't-fail (until, you know, it falters, stumbles, or simply outright fails).To make matters worse, this field has to do with money. A lot of money (see technical reference earlier "gazillions of dollars"). So much so, that in a recent conversation with a CEO of a headline-grabbing FinTech company, I was literally asked "why don't you start your own company? All you need are 3 programmers and a half-decent idea and you'll easily raise one million dollars". Second, this is still start-up land where the commonly held rate of success hovers just around 10% (definitions and estimates vary. Wildly). Third, while organizations are chomping at the bit not to be made obsolete, there is still a healthy amount of skepticism out there as we are talking about money. People care about this stuff. Sure, if Waze gets it wrong and you are late to meet some pals at the pub, you will be upset. If Facebook/Instagram/Twitter have a hiccup and you can't get your peeps the latest vital update about your cat's brand new hat, there will be some agro. But I'm willing to wager that you would feel quite differently if you went online to your favorite bank application and saw that your bank account was dramatically different than what you thought.
While there are many more reasons to cool our heels, I prefer to end with a positive note. It's well overdue for Finance and Technology to bury that hatchet and make our financial lives simpler, more accessible and perhaps even a bit more fun. We did say friends with benefits, right?
In the annals of dork-turned-cool, there is no fiercer competition for numero uno than the one between Finance geeks and technology uber-geeks. On one hand we have the numbers guys and on the other we have the, well, numbers guys.
Both emerged from the anonymous dark rooms in the back-office to the front covers of magazines which the public reads (i.e., not Wired or the FT, though, funnily enough, these have become much more mainstream in a classic chicken-or-egg case).
During this evolutionary process, a certain uneasy tension grew between said groups. Each became more and more entrenched in its silo, and begrudgingly accepted the other side's right to be opaque. In recent years, things changed. Trenches were filled in, silos broken and opaqueness demystified. Why?
Setting altruism aside, it's a simple case of evolution - constrains led to symbiosis.
Let's review and see how this match was made. Similar to any other relationship, there are 4 main steps, we'll start at the beginning.
Step 1 - Discovery (or "How did you catch my eye?")
From the Finance Side
The CFO looks at the top line, and then the bottom line, and then the top line again and realizes that in most cases, the net profit margins are around 9% (see RBC Capital Markets' Myles Zyblock breaking down S&P 500 net profit margins by sector). One doesn't need to have been a with Long Term Capital Management to figure out that it requires a massive increase in the top line to move that bottom line in any considerable fashion. Then the CFO looks at the expense side of the B/S and doesn't fail to see the 900 lbs gorilla there - IT. Any penny saved, is a penny net earned - why go for 9% return when you can go for 100%?
From the Technology Side
The CTO is confident that he has the smartest guys in the firm. And yet, whenever he attends board meetings, he seems to be marginalized as a service provider, and not a power-multiplier, as he should be considered. He takes a look around the room and does a quick calculation of cost/benefits of alliances. Operations, Administration, HR, Accounting are in the same boat, no luck there. On the other hand, Marketing, Sales, Business Development and kin are in a different world well outside his comfort zone. Then epiphany strikes - the other dork-turned-cool. She'll understand. They both rose from obscurity to greatness. There is a partnership to be had there.
Step 2 - Mutual Benefits (or "What Have you Done for me Lately?")
After a (very) short period of courting, both sit together to work on a win-win solution. Finance quickly learns to harness IT's automation and innovation to streamline businesses, while cutting unnecessary costs. IT professionals meanwhile gets a crash course in business from the guys who understand it inside out, and learn the age old adage - follow the money. No longer are they simply doing because they were told, now they can understand how to better prioritize 2 competing business needs and divine which buck will produce the bigger bang.
Both C-suite execs truly become more valuable and this partnership keeps yielding unforeseen benefits to the business as a whole, and to the two departments in specific. The IT folks start to get a much deeper understanding of how their labor translates into profits, and the Finance people find more and more ways to utilize capabilities that were always in their organization, but simply were untapped.
However, one more benefit remains that is the true win-win and the most striking.
Step 3 - Next Steps (or "It's a Boy/Girl!")
After a few years of this synergy, "helped" by 2007/8 crash which lead to more Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Read this Term and less room for innovation in large financial companies, a new creation comes to life - Financial Technology. Why not take all the benefits of this agnostic union, while stripping away all the legacy code and specificity to create a brand new industry?
Thus emerged FinTech - a happy marriage of Finance and Technology where gazillions of dollars meet oodles of innovation (seriously, Accenture's ad-nauseam quoted estimates are $6-8bn investment by 2018). Unhindered by a particular company's compliance, operational issues, politics and this-is-how-we-do-things-here-in-XYZ, the FinTech arena is full to the gills with smart people armed with smarter ideas that make huge splashes. Suffice to take a look at some of the recent competitions / conferences to see how technological concepts are taking the financial world by storm. It's hard to walk around in Silicon Valley (CA), Silicon Alley (NY), Tech City (London) or Tel-Aviv/Herzliya (Israel) without hearing the buzzwords - Big Data, BI (Business Intelligence), Machine Learning, Cloud
Cloud
The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing conc
The cloud or cloud computing helps provides data and applications that can be accessed from nearly any location in the world so long as a stable Internet connection exists. Categorized into three cloud services, cloud computing is segmented into Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). In terms of trading, the versatility of the cloud service allows retail traders the ability to test out new trading strategies, backtest pre-existing conc
Read this Term (storage/computing), disruptive technology this and revolution that (later article will be dedicated to bashing these - stay tuned).
Step 4 - Growing Up (or the feared "We Need to Talk")
While much has been said / written to glorify this nascent field, there is a need to keep a bit of the enthusiasm in check. First and foremost, every new field gets this halo of can't-fail (until, you know, it falters, stumbles, or simply outright fails).To make matters worse, this field has to do with money. A lot of money (see technical reference earlier "gazillions of dollars"). So much so, that in a recent conversation with a CEO of a headline-grabbing FinTech company, I was literally asked "why don't you start your own company? All you need are 3 programmers and a half-decent idea and you'll easily raise one million dollars". Second, this is still start-up land where the commonly held rate of success hovers just around 10% (definitions and estimates vary. Wildly). Third, while organizations are chomping at the bit not to be made obsolete, there is still a healthy amount of skepticism out there as we are talking about money. People care about this stuff. Sure, if Waze gets it wrong and you are late to meet some pals at the pub, you will be upset. If Facebook/Instagram/Twitter have a hiccup and you can't get your peeps the latest vital update about your cat's brand new hat, there will be some agro. But I'm willing to wager that you would feel quite differently if you went online to your favorite bank application and saw that your bank account was dramatically different than what you thought.
While there are many more reasons to cool our heels, I prefer to end with a positive note. It's well overdue for Finance and Technology to bury that hatchet and make our financial lives simpler, more accessible and perhaps even a bit more fun. We did say friends with benefits, right?
