[box type=”info” align=”” class=”” width=””]Sennen Desouza, Hammad Hashmi, & Baqar Jafri
Co-Founders Investors Lounge
Pakistan’s Leading Financial Analytics Firm[/box]
[dropcap]F[/dropcap]inancial Technology or ‘Fintech’ has taken the centre stage in discussions on business model innovation, especially for commercial banks and investment management industry. Big Data, Artificial Intelligence and Block Chain are gaining acceptability in global financial fraternity. Are Pakistani financial institutions ready for this transition? To explore this, we took exclusive interview of the co-founders of Investors Lounge, Pakistan’s leading financial information and analytics firm, to get their insights on the 5 Major Trends that will completely transform Pakistan’s Financial Sector by as early as 2020.
[box type=”shadow” align=”” class=”” width=””]About Investors Lounge
Investors Lounge is Pakistan’s leading Financial Analytics Company. The firm operates Pakistan’s largest financial data centre to power its information solutions for financial institutions and retail investors. Investors Lounge services over 10,000 stock market investors and some of the most prestigious local and international financial institutions. Some of these names include Tundra Fonder (leading Swedish Fund Manager), JS Global Capital Limited (Pakistan’s Top Brokerage Firm) to name a few.[/box]
1) Data: The New Currency of Knowledge Economy
Institutions must realize that we are living in the knowledge economy where data is the key monetary asset. Data and analytics, especially in the realm of financial services, will form the foundation for prudent investing decisions. This transition has already arrived in developed markets and it is high-time for financial institutions in Pakistan to develop a data-driven approach towards investing. We, at Investors Lounge, run one of the largest financial data centers in Pakistan and collaborate with institutions to make financial data meaningful.
2) Online Payments – Not a Problem!
An exciting era of e-commerce is at our doorstep. With the Alibaba Group and other e-commerce/payment solution companies entering Pakistan, the dream of ‘Single click checkout’ would soon be a reality. Are banks and financial institutions ready to play their part? Perhaps not yet. There seems to be an agreement on value dulled by the fear of accepting change. However, a handful of them have started to gear up for this transition. Banks like UBL and HBL have started to collaborate with Fintech companies and these collaborations need to be enhanced for a delightful ‘Online buying’ experience.
Data is the new currency of knowledge economy. Using data-driven solutions, financial institutions around the world are making finance digital and autonomous. Pakistan will slowly but gradually catch up with the world. We, at Investors Lounge, work with financial institutions to develop investing solutions using data-driven models. Financial institutions are collaborating with us to develop intelligent investing solutions for investors.
3) Leveraging the ‘Fintech’ Nexus for Customer Acquisition and Servicing
Indian Banks are no more at loggerheads with Financial Technology Companies. They are now partners! They have captured millions of customers through integrating their banking solutions with fintech companies who provide insurance, crowdfunding, e-commerce, and investment solutions. Some institutions have even invested in fintech to align themselves with the future wave of innovation. We will see some breakthroughs in this direction here in Pakistan. From Investor Lounge’s experience integrating data services with financial institutions, we feel that the biggest bottlenecks in this transition are conservativism and regulatory compliance.
4) AI and Machine Learning for Financial Decisions
The future of finance is digital and autonomous. Data-driven intelligent systems are not only user friendly, but also reduce the cost and increase the quality of financial advice. For example, Goldman Sachs uses AI to analyze massive chunks of data to see how weather, news and events can impact financial markets. Almost 40% of American hedge funds launched way back in 2015 used AI for investment decision making and they continue to use technology since it has allowed them to outperform other funds. However, Pakistani financial institutions are not just there yet. When we share our data driven models with institutions, they often consider such autonomous decision-making models too futuristic. The problem is that our Senior Tech Resources have been choked so much in compliance and are so attuned to legacy systems that they find it impossible to think outside of the box. This is set to change soon. It will take just one leading institution to enter this domain of automation and the herd mentality will force others to follow suit. We can then expect many players in the market to venture into domains like Robo Investing, Automated Portfolio Optimizers, Algo Trading, etc.
5) Development of Capital Markets at the Highest Pace in Pakistan’s History
A lot is happening in Pakistani financial markets which requires appreciation. Pakistan has been included in MSCI Emerging Markets, Chinese Investors are all set to take majority stake in Pakistan Stock Exchange. What does it mean? To say the least, we foresee a full-fledged Futures Exchange to be introduced in Pakistan. For SME Financing; SME Exchange has been conceived; and we will see startups and SMEs getting listed on the exchange in coming years. Investor base can be doubled with the inclusion of Chinese investors in local markets and a proper investor education drive. Investors Lounge is already working with key institutions to raise investor education by leveraging on technology. To conclude, both depth and breadth of financial markets will increase in coming years at the highest pace in the history.
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PAGE: HOW ARE PAKISTANI FINANCIAL INSTITUTIONS AND INVESTORS RESPONDING TO THIS FINTECH WAVE?
INVESTORS LOUNGE: Pakistani financial institutions and venture capital firms have adopted a wait-and-see approach when it comes to fintech investing. The only real Fintech Investing groups are ‘Planet N’ Group and Arpatech Technology Ventures. There are others who are claiming to be Fintech investors but this is limited to claims since no real deal flow has been documented yet. Once innovative Fintech efforts begin to receive financing we can expect a transformation of the value creation chain of conventional banking and investment management industry. Big institutions continue to make the mistake of trying to replicate products by exercising their financial muscle. What they don’t realize is that legacy systems and conventional management acts as a roadblock to innovation in Fintech.
PAGE: HOW CAN FINANCIAL INSTITUTIONS AND INVESTORS BENEFIT AND PREPARE FOR THE INEVITABLE FINTECH DISRUPTION?
INVESTORS LOUNGE: Being forward-looking and open to intelligent systems will allow institutions to obtain an information advantage. Open-mindsets and collaborations with startups can help produce results. Financial Institutions need to be open to investing in intelligent systems while pulling back from having unnecessary compensation and distribution expenses. They can pass on these cost savings to clients, along with much better financial service experiences.
PAGE: HOW WILL THE FINTECH TRENDS AFFECT THE CAREERS OF FINANCE PROFESSIONALS?
INVESTORS LOUNGE: There is a lot of debate on whether financial industry professionals will be replaced with machines in the near future. This comes in the wake of numerous developments in mature markets. JPMorgan, one of the largest American banks, has already developed an AI-based system to automate their stock market trading activities. Exactly how many jobs will be lost after this development is uncertain. A report by Citi in 2016 predicted that up to 30% of bank jobs could be lost by 2025. Another example is the Royal Bank of Scotland, which laid off around 550 workers and replaced them with Robo-advisors.
Whether machines will completely replace humans in the workplace might be debatable, but one trend is evident – the nature of jobs in the finance industry and its requirements are changing swiftly. There was perhaps no better a time than now for Finance professionals to upgrade their skill set and knowledge base. Professionals must adopt data science as a subject; since institutions will see a growing need for data scientists in Pakistan. This is no more just a necessary condition for growth, but for survival.
Data Speaks and its Language is Data Science
Profitable investing requires in-depth research and a lot of data crunching. For developing countries like Pakistan, the access and availability of financial data has always been a major hurdle to the growth of Capital Markets. As a Fintech firm working in domain of Big Data, we collect, analyse and present financial data related to listed companies and the economy through state-of-the-art dashboards. We are firm believers of the philosophy that data can reveal tremendous wisdom if we learn to speak and interpret its language. Our analytical tools incorporate nothing short of the best practices of data science. Our experience in financial markets and understanding of technology gives us a solid comparative advantage in bringing complex financial information to life.
Investors Lounge is Launching Pakistan’s Most Advanced Financial Dashboards
For decades in Pakistan, only the biggest fund managers had access to timely and accurate financial information through purchasing expensive Bloomberg Terminals. But we have always believed that access to such information should be right and not a luxury. After expending a lot of effort, we were able to break that trend. Now, you can have access to the same information that the biggest fund managers benefited from previously. And you are able to get this at less than 5% of the cost of a Bloomberg terminal. The platform provides recommendations from the best analysts in Pakistan along with in-depth financial data and visualization tools. This addresses both the hunger for financial content as well as convenience, turning the life-long dream of serious investors into reality.