Winning with Algorithms, AI, and Decision Tools in FinTech

In the 1980s, we saw the emergence of computers as it became a norm for most companies to use it for storing and processing data. In the 1990s, we witnessed the surge of the Internet and it has really changed the world. Gathering information about anything in this world is now child’s play. Since the middle of the last decade, we saw the arrival of social media. Companies understood that customers were spending more time using social media than ever; that is why companies across the world have started investing in social media to increase their reach and to market their offering to the customers. With the introduction of Android and iOS, there was a paradigm shift. People started spending more time on their smartphones compared to their desktops. With time, consumers started using their smartphones for decision-making, purchasing and even making payments. Today, companies are trying to provide an omnichannel experience to their users as they have realized that smartphones are now an integral part of their decision-making. But the question is: What is the next tool that companies should look at? Well, we think they’re algorithms.

Let me illustrate the benefits of Algorithm with a small example. Dash Financial, a leading FinTech company has recetly won the Best Buy-Side Algorithmic/DMA Product or Service category in this year's Waters Buy-Side Technology Awards. Let’s sneak into the features that Dash Financial provides with Algorithm. The suite developed by the company focuses on performance and fee optimization. The ability to customize behavior at any level and by any category is one of Dash's distinguishing features, which, when combined with its commitment to real-time transparency, makes for a highly compelling, buy-side focused trading infrastructure.

DASH's sensor algo suite is completely customizable via its Algo Wizard, a proprietary software layer which allows the tailoring of parameters, behaviors and techniques at the firm, strategy, portfolio manager and even symbol without the need for re-coding and lengthy release cycles. The results of any changes are immediately apparent in the Dashboard- a comprehensive, real-time, web-based reporting layer delivering access to every component of the routing and execution process. Dash clients are able to see where their orders are being routed and why, along with the market conditions and depth of book snapshots down to the microsecond that each order is routed. This tool is a crucial element in algorithmic attribution, analysis and further enhancements / customization.

In the last ten years, companies have gathered enough data, through multiple channels where algorithms can be deployed. Algorithms will help companies in understanding data by going beyond traditional reporting, help in predictive analytics and will also help firms in making decisions in no matter of time. Data mining, pattern extraction, smart classification, machine learning will change things across industries in the next five years. The FinTech industry will certainly not be an exception. Today FinTech segments like trading and lending have already integrated algorithms for faster decision making. What we can say is the use of algorithms by FinTech firms has just started and will certainly reach the zenith in next few years.

FinTech firms using artificial intelligence

FinTech firms using machine learning

Other firms using algorithms

How companies can win with algorithms:

Today, investors and borrowers across geographies are looking for solutions that make decisions in the fraction of a second. The companies that can make decisions or contribute to decision-making in a few seconds are the one who will win the race. With technologies like artificial intelligence and machine learning, companies will be able to understand tons of data that has been accumulated over the years in few seconds. Whether its stock trading, lending, or analyzing a fraud, sophisticated pattern recognition is one of the key things that every FinTech firms is looking at. Algorithms also help in experimentation. After identifying different patterns in today’s world, companies hesitate to take risks, but experimentation is much easier with the help of algorithms.

The new algorithm-enabling technology is here, and firms now have the freedom to fundamentally change the value proposition for their customers. FinTech firms implementing algorithms in the days to come will leapfrog well ahead of their competitors.