OPINION: 2020 to Stay a Building Year (Part I)

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The new year’s rocky start spells exciting times for IntelAlley and the beats that it covers. Financial technology will see much progress in 2020, but not as many deliverables that fintech evangelists and vendors promised over the past few years.

Artificial Intelligence
The speed at which AI matures will continue to grow at breakneck speeds. The only question will be how fast organizations are willing to incorporate the technology into their various workflows.

The mushrooming number of providers of AI-as-a-Service has democratized access to the technology for firms of any size. No longer will firms have to acquire and maintain employees with those particular skill sets. A new small five-person fund could put itself on a level playing field with the largest established players.

However, organizations should think about employing AI beyond trading and investment selection. The technology is gaining footholds in the middle and back office. UBS has implemented a machine learning pilot to help identify potential trade breaks by analyzing the unstructured data within emails that are sent to its operations teams before a trade escalates to an actual break. The bank expects that its risk, legal, and other departments also could benefit from the ability to identify situations prone to escalation and identify them earlier.

While UBS looks to use machine learning to address natural language processing, others have eyed its use for processing machine languages. Startups like Phase Change Software are using AI to understand software from a conceptual perspective.

Imagine if a firm could point an AI at its ancient legacy codebases and reverse engineer them into a currently supported architecture? All of a sudden, those legacy applications aren’t heavy weights that hold back innovation.

Blockchain
Distributed ledger technology continues to wallow in Gartner’s infamous “Trough of Disillusionment.” Fewer firms are willing to tout their proofs-of-concept as they did a few years ago, and those who did have quietly pulled the plug on several of them.

For financial services to adopt distributed ledgers, many firms likely will wait to see the technology in production before they move forward with it.

Such concerns make what the Australian Securities Exchange is doing all the more critical for the industry. It has taken an all-in approach and is migrating from its legacy Clearing House Electronic Subregister System (CHESS) to a new platform that incorporates distributed ledger architecture.

Although ASX officials expect the new system to go live in the second quarter of 2021, 2020 will remain an important year for the exchange operator and its clients.

The ASX has planned industry-wide connectivity tests and technical accreditations that will start mid-year as well as the migration’s dress rehearsal that should begin around the fourth quarter of the year.

Once the platform goes live and market participants have the first-hand experience of using distributed ledger technology outside of their private development sandboxes, adoption is likely to soar.

Stay tuned for Part II of the column in which examines what the new year has in store for crypto, data, and the enterprise.