Joseph Péteul

Last week was Boston Fintech Week and even if we didn’t have as much as time as last year to devote to it, we were very happy to attend some of the events. We will be writing a short series of posts to share our takeaways and the key insights we gathered from each event. Let’s start with the event hosted by the DCU Fintech Innovation Center on the next generation bank.

The speakers were composed of incumbents and start-ups working on the front-end and on the back-end. The first distinction that was made was between neo-bank and next gen bank. The former is purely front-end related, the neo-bank will partner with an incumbent and utilize its back-bone. The innovation will be focused on the front-end and trying to solve pain-points for a specific segment of the market. I don’t want to minimize their work as they are clearly bringing value (financial inclusion, financial education, …) but when we think of the bank of the future, we are more thinking of the next gen bank.

As you may have guessed already, the next gen bank starts from scratch. To be more accurate, the next gen bank starts from the back-end. The design of the back-end is fundamentally different from the incumbent. The incumbent is suffering from its legacy system at its core: the unique record keeping system has been built in the 20th century and is running 24/7. Instead of upgrading it, which could be risky, the incumbents are building on top of it, which requires interfaces that can speak with that old system. It also makes difficult the upgrade of part of the system.

The next-gen bank is differentiating itself by building directly in the cloud, embedding analytics capabilities at its core and is based on APIs. This allows to use different languages for different functions, to isolate everything while maintaining the same level of reliability on the single source of truth system. This also means that instead of reinventing the wheel, the nextGen Bank can use bricks developed by other companies and assemble its system, tailor-made to its needs, at a lower cost. We add the pleasure to hear Colby Ross from Project Finance as well as Sankaet Pathak from Synapse Fi to explain at what level they can actually assist next-gen banks in the design of their back-end.

The next-gen bank is also about lowering costs to be able to lower fees. To that extent, we were delighted to hear a fellow MIT graduate on the use of cutting-edge Natural Language Processing (NLP) technics to create a more conversational bot to answer both the phone and the chat. Karan Kashyap, Posh CEO, was explaining that, to be effective, it is all about context and that most of the bots today had a very short-term memory, if not no memory at all. His new technology was able to remember what has been said earlier in the discussion and use it to answer questions. He didn’t go into details but our guess is that he might be using attention technics or rotational units of memory. The use case is to either answer questions on the spot or to be able to classify the degree of emergency to prioritize the different requests for humans to treat them afterwards.

On the front-end, the discussions were about making banking either more social (tool to communicate with others around money) or more fun (speak a language that is adapted to the population, i.e. millennials). Some companies were applying the discoveries of psychology from the past 40 years to help client break vicious circle. We all have cognitive biases and depending on the framing or the nudges we are perceiving, we may act one way or another.

All-in-all, this event brought some clarifications on the different areas of progress in the retail banking sector, the current state of the technology and what’s coming.

Joseph Péteul

Greater Boston 1K followers 500+ connections

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Experience

Kendall Gateway Group

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Education

Massachusetts Institute of Technology - Sloan School of Management

Volunteer Experience

Board Member

French Tech Boston

Publications

How Have ETFs Changed Market Macro Efficiency and Risk Structure?

Journal of Portfolio Management July 4, 2022

Languages

French

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English

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German

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