Trick or Treat! How FinTechs and FIs can overcome their biggest fears as Halloween nears?

Just about everybody in the now iconic Game of Thrones (GOT) series – Ned Stark to Jon Snow and Arya Stark, talked in hushed whispers about the coming of winter as a forewarning of harsher times in the months ahead and the need to be prepared.

With Winter around the corner, Halloween’s almost here. Honoring the Celtic tradition of Samhain, Halloween in ancient times was meant to be a preparation for the harsh months ahead. Bonfires were built in honor of the saints and for protection from the ghosts and other evil spirits – who supposedly walked the earth on this day. Carving out a pumpkin lantern and going trick-or-treating were all meant to ward off evil spirits, and the tradition continues to date.

We have decided to carry forth time-honored rituals of scaring your guts out this Halloween. So be prepared! Here’s a listing of the biggest scares for fintechs and financial institutions as Halloween approaches.

Heading towards a Recession: Winter is Coming!

There’s a foreboding that this winter will be difficult with no resolution to the Ukraine-Russia conflict in sight and Europe in the midst of a massive power shortage crisis that could soon escalate into the coldest winter ever for Europe with households across the continent being asked to exercise Thrift and Caution. In America as well, things are looking none too bright.

• According to the latest Economist/YouGov Poll 3 in 5 Americans believe the US is heading for an ugly downturn. (Source: BBC) The once-roaring housing market is showing signs of slowing down. Is it a replication of the 2008 downturn? We do not know yet, but the similarities are hard to ignore.
• It is tough times ahead for Fintechs as the Financial Times estimates that an astronomical half a trillion dollars have been wiped from the valuation of the same fintechs that benefited the most from the IPO boom in 2020 as “everyone was stuck at home and buying stuff online.
• Recently listed FinTechs have fared the worst, with cumulative market capitalization falling by $156bn in 2022, and if each stock is measured from its all-time high, around $460bn has been lost.
• Buy Now, Pay Later platform Klarna stocks plunged by 85% to $ 6.7 bn in July. Even well- established players like PayPal, Block, Robinhood, and Upstart have not fared any better. Robinhood has been under the Securities and Exchange Commission scanner for perceived conflicts of interest. Klarna too has had run-ins with the regulators. In short, fintechs are having a tough time convincing key stakeholders – investors, end customers, and regulators that their business model is what is best needed for the current times.

Beating the Scare!

Magic FinServ’s advisory team combines the best of both – finance and technology – for a comprehensive understanding of the complex business requirements of the fintechs – be it security, meeting regulatory requirements, or meeting customer expectations. Even in these recessionary times, we can help you drive ideas to execution with both speed and ROI.

Rise of the White Walkers: Untested Business Models and Escalating Costs

The white walkers are icy-eyed, sword-wielding undead that constituted the biggest threat to the existence of Jon Snow, Daenerys Targaryen, and the collected forces at Winterfell.

In fintech terms, untested business models and lack of profits coming from moonshot projects are the biggest threats to Fintech existence in 2022 and beyond as investor confidence in projects that have failed to take off, or are beset by regulatory issues, or have not reaped the expected results, has slumped.

This is evident in the findings of the research firm CB Insights, which has indicated that there is an 18% drop in fintech funding between the last quarter of 2021 and the first of 2022. It is also likely that with the Feds hiking the interest rates in the third quarter, business loans will get harder to repay, hence there is an overarching need to relook strategy and prioritize areas where automation and emerging technologies can do the heavy lifting and curb costs. Here is how Magic FinServ can help you find a middle ground between innovation and ROI.

1. Begin with a robust data governance and management strategy

   Good data opens up many new opportunities, but bad data is stressful and can take you back by the ages. Data is the deal-breaker for almost all financial organizations. A sound data governance and management strategy can redress many of the red-herrings of modern financial organizations – data security, regulatory compliance, and application launch and performance.

2. Becoming compliant

   Not just the Fintechs, even reputed banks and financial institutions run the risk of running foul with the regulators due to their aging and siloed IT systems which is a ticking bomb for data breaches. With proper data governance and management mechanism issues related to access of data, identifying how sensitive and identifiable it is, tracking access and ensuring that it is legitimate, and also ensuring that access is guided by regulatory requirements can be easily addressed.

3. Identify areas where AI and automation can do heavy lifting

   Resources are scarce. Though employees are increasingly being prevailed upon to come back-to-office, the cloud has made it possible to work remotely as well in times of crisis. In the capital markets and financial services where data has extrapolated over the years ensuring a single source of truth and identifying areas where automation be implemented not just for streamlining processes and but for ensuring deeper insights as well.

Magic FinServ’s ready-made solutions for Fintechs lower ROI and ups Innovation

With our years of experience in capital markets and finance and several successful implementations over the years, we enable a custom-fit solution to all your concerns. We firmly believe that it is essential to set the house in order first – and by that we mean the back-end and middle office where massive amounts of data existing in silos create chaos and clog down workloads and pipelines.

Our reusable frameworks and technology IPs are just what you need to exercise thrift in these uncertain times. After all, the costs of rework and duplicity are humongous. We have also come up with new and innovative ideas and solutions for providing transparency and real-time information for improving trading outcomes in the financial services industry.

The Wicked Queen of the House of Lannister: Poor Data Quality

There have been plenty of wicked Queens in our fairy tales – from the Red Queen in Alice in Wonderland who goes “off with her head” every time her wishes are unmet to Snow White’s evil stepmother who gave her the poisoned apple and put her to sleep for years to come, but none as evil as Cersei Lannister in the Game of Thrones. She redefined evil.

While it would be misplaced to compare bad or poor-quality data to the Evil Queens, they are indeed a source of misery for many financial services organizations. The overall impact of poor-quality data on the economy is huge. IBM indicated that poor data quality wipes away $3.1 trillion from the U.S. economy annually.

Bad quality data is undesirable because:

• It lowers employee morale
• Productivity is low
• Results in system outages and high maintenance costs
• Biased and inaccurate outcomes despite the use of high-end AI engines

Unfortunately, with no means to measure the impact of bad data on businesses, a majority of organizations are still clueless as to how they can do things better.

On the other hand, sound data management and robust data practices could reap untold benefits. For example, if 1000 businesses were able to increase data accessibility by just 10%, it would generate more than $65 million in additional net income.

Treat? Getting your Data in order with Magic FinServ

We address all the data woes of organizations – poor data quality, spiraling data management costs, and cost-effective data governance strategy. And it all begins with the pre-processing of data at the back- end, aggregating, consolidating, tagging, and validating it.

With organizations hard-pressed for time, data quality takes the back seat. Now no more.

• Our experts are well versed in data management technologies and databases like MongoDB, Redis Cache, MySQL, Oracle, Prometheus, Rocks dB, Postgres, and MS SQL Serve.
• Partnerships with the industry leaders like DMAC for ensuring a cost-effective data governance strategy in sync with the best in the trade.
• Magic FinServ’s DeepSight^TM for data extraction and transformation and deep insight from a varied range of sources in a plethora of formats in standardized formats that can be easily integrated into analysis, algorithms, or platforms.
• Our machine-learning-based tools optimize operational costs by using Al to automate exception management and decision-making and deliver 30% – 70% cost savings in most cases.

Tightening the Belt

2022 and 2023 will be tough. No doubt about that but many still predict that there will be a soft landing, not a full-fledged recession. The source of that optimism is the American job market which in August added 315,000 new workers in August. The US Federal Reserve Governor Christopher Waller recently reiterated that the robust US labor market was giving America and Americans the flexibility to be aggressive in their fight against inflation. Nevertheless, fintechs still need to go aggressive with digital transformation and data democratization strategies to reign in the costs with AI, ML, and the Cloud. So, if there is more that you would like to know contact us today at mail@magicfinserv.com.