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Winning with Algorithms, AI, and Decision Tools in FinTech

Prove
October 5, 2021

In the 1980s, we saw the emergence of computers as it became a norm for most companies to use them for storing and processing data. In the 1990s, we witnessed the surge of the Internet, which has changed the world. Gathering information about anything in this world is now child’s play. Since the middle of the last decade, we have seen the arrival of social media. Companies understood that customers were spending more time using social media than ever; that is why companies worldwide have started investing in social media to increase their reach and market their offerings 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. Consumers started using their smartphones for decision-making, purchasing, and even making payments with time. 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 an algorithm with a small example. Dash Financial, a leading FinTech company, has recently won the Best Buy-Side Algorithmic/DMA Product or Service category in this year's Waters Buy-Side Technology Awards. So let’s sneak into the features that Dash Financial provides with algorithms. The suite developed by the company focuses on performance and fee optimization. One of Dash’s distinguishing features is the ability to customize behavior at any level and by any category. Combined with its commitment to real-time transparency, it makes for a highly compelling, buy-side-focused trading infrastructure.

DASH's sensor algo suite is completely customizable via its Algo Wizard. This proprietary software layer 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 can see where their orders are being routed and why along with the market conditions and depth of book snapshots down to the microsecond each order is routed. This tool is crucial in algorithmic attribution, analysis, and further enhancements/customization.

Companies have gathered enough data through multiple channels where algorithms can be deployed in the last ten years. Algorithms will help companies understand data by going beyond traditional reporting, help in predictive analytics, and help firms make 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. We can say that the use of algorithms by FinTech firms has just started and will undoubtedly reach the zenith in the next few years.

FinTech firms using artificial intelligence

AI

FinTech firms using machine learning

ML

Other firms using algorithms

Others

How companies can win with algorithms

Today, investors and borrowers across geographies are looking for solutions that make decisions in a fraction of a second. The companies that can make decisions or contribute to decision-making in a few seconds are the ones 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 a few seconds. Whether it’s stock trading, lending, or analyzing a fraud, sophisticated pattern recognition is one of the key things every FinTech firm looks 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 change the value proposition for their customers fundamentally. FinTech firms implementing algorithms will leapfrog well ahead of their competitors in the days to come.


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