editions

Through its Global Markets Incubator, SocGen has honed a way to fast-track innovation, build relationships with cutting-edge startups, and take a leading role in sustainable finance. 

SocGen has a clever way to tap into the buzzy ESG technology industry.  

It just selected eleven startups to join its Global Markets Incubator (GMI), where they will have six months to test and deploy their products within SocGen’s business.  

This year’s cohort includes firms focused on financial carbon metrics, impact investing, biodiversity, and more. The “win-win relationship” gives entrepreneurs access to SocGen experts and feedback, while the bank benefits from “rapid progress and the deployment of innovative solutions.”  

The incubator – which SocGen originally launched in 2018 – ultimately allows it to test tools that it can eventually offer to its clients or use for its own corporate responsibility goals, as environmental, social, and governance (ESG) concerns continue to be a hot topic for regulators, board members, and customers alike. 

“Whether the challenge is climate change, positive impact or governance-related matters, the GMI’s program offers a very exciting opportunity to work with top-of-the-class companies and develop out-of-the-box thinking,” according to the bank’s head of GMI, Antoine Connault.  

Since 2018, more than 50% of cohort companies have entered a commercial relationship with SocGen, Connault told Insights Distilled. For example, Entelligent’s climate science and AI for Alpha’s deep learning techniques are embedded into the bank’s quantitative strategies, while Opensee helps it efficiently visualize and manage its risk metrics, and Nephelai improves its trade booking processes.  

GMI allows SG to “constantly benefit from frontrunning technology innovation, combine our expertise with that of founders and innovation-led companies, and feed our buy/build strategy,” Connault told Distilled. Chosen companies, meanwhile, get to “tap into our expertise, network, reach” in a partnership “that is much more than a usual vendor/client relationship and supports their growth.” 

Here’s the full list of participating companies in the latest cohort: Aspiration, Emmi, BeZero Carbon, Enmacc, Regrow, Net Purpose, Simpl, Greenscope, YvesBlue, Arboretica, and allcolibri. 

This kind of hyper-focused incubator program gives financial firms like SocGen a way to tap into emerging technologies in a deliberate and time-boxed way, speeding up the partnership process. 

 Similarly, Banco Santander recently teamed up with Microsoft on a contest for startups that are using AI to have a positive impact.  

For other techniques that FinServs can deploy to build better relationships with ScaleUps, read our report here.  

Financial institutions have increased their desire for technology that provides real-time data analysis, stress-test scenarios, and communication aggregation as they seek to protect themselves from risk.

This year’s banking crisis continues to have ripple effects for banks’ technology strategies.  

After SVB’s collapse, enterprises are looking critically at their own risk management and planning to up their investments: An analyst predicts in American Banker that “banks will increase their annual spends on risk technology by 8% to 12% in the next 12 months.”  

Financial institutions have long had robust tech teams and robust risk teams, but the events of the past month underscored their need to coordinate more closely in real-time.  

For example, Vanguard CIO Nitin Tandon recently spoke out on the topic of how FinServs’ risk and IT divisions need to come together: “Technology plays a key role in being able to analyze the data, come back with the risk profiles, and develop risk postures.” 

To that point, it’s essential that any data management solution work across organizational silos and take advantage of alternative data sources. For example, the way that communication channels like Twitter and WhatsApp groups contributed to Silicon Valley Bank’s collapse highlighted the need to monitor external datasets. 

Through external partnerships, financial institutions can gain information to help them target SMBs with personalized recommendations on financial content and products. 

A group of financial institutions has linked up with a small business-focused fintech to help them make personalized recommendations. 

JPMorgan Chase, Wells Fargo, and Mastercard are all working with Hello Alice to offer its new Business Health Score tool, which helps SMBs measure and improve their creditworthiness. 

Chase and Wells Fargo will offer the recently announced tool to entrepreneurs and small businesses, while Mastercard will make it available to partner banks that offer small-business credit cards. 

The goal is to simultaneously “empower small business owners” and help FinServs better serve their customers.  

The insights from Business Health Score “provides on a small business owner’s business health and challenges “will benefit financial institutions by allowing them to better identify the needs of small business owners, improve their own engagement strategies and product marketing, and make better recommendations on products and services to SMBs,” Hello Alice CEO Carolyn Rodz told Insights Distilled.  

Hello Alice has reason to believe that SMBs need help: Its research found that only 25% of small business owners have applied for a business credit card, and 85% of those applications were denied due to poor credit or lack of credit. The firm expects that personalized recommendations, education, and products can help turn that tide.  

For example, if a business owner indicates they have a strong revenue stream but struggle with cash flow management, they might receive interactive educational content from Hello Alice alongside information about Wells Fargo’s treasury management solutions.  

The tool is also part of a larger, industry-wide focus on SMBs: Small businesses have historically felt underserved by their financial institutions, leading FinServs to focus lately on hyper-targeted features and products, including Amex’s cashflow-management hub, Standard Chartered’s partnership with upSWOT on personalized tools, and Westpac’s work with Rich Data Co to supercharge its ability to provide credit.  

One of the major hurdles to effective fraud prevention is data disorganization: By consolidating, analyzing, and providing context and connections across previously disparate information, data intelligence platforms can help investigators spot issues, faster. 

A squad of banks just joined the $129 million Series E for Quantexa, a decision intelligence firm that helps break down data silos to combat fraud.  

Most organizations have all the data they need to fight financial crime, but silos and manual processing prevent them from seeing the bigger picture. Master data management tools – which combine information across different source systems – provide transparency and can ultimately help financial institutions understand risk, prevent fraud, and spot opportunities for improvement.  

“Organizations are increasingly in need of a reliable single source of truth within the organization, and traditional approaches and technologies are not solving this need,” chief product officer Dan Higgins told Insights Distilled. Quantexa “deliberately created a truly open architecture that allows for easy integration and industry standard adoption, for everyone from data scientists to analysts,” he added.   

Quantexa’s technology has a wide range of use cases across financial services: It has helped HSBC screen for money laundering across millions of trade finance transactions and launch its Global Social Network Analytics platform, it supported Standard Chartered in investigating criminal activity across billions of data points, and it aided Allianz Insurance in managing risk. 

For example, the firm said it can process 60 billion data records in a single day, with 99% data match accuracy, and a 20% average rate of de-duplication of records. Banking customers have used its platform to reduce financial investigation times from weeks to hours.  

Musings on ways to use generative AI in finance have continued: A tech leader at Goldman Sachs believes that large language models and chatbots could enable better knowledge sharing than traditional software-management systems, which have often failed to live up to expectations.  

A top Goldman Sachs executive suggests that an AI-powered chatbot could help the bank record, store, retain, and access institutional knowledge.  

Chief information officer Marco Argenti sent an email to the bank’s engineering staff, seen by Fortune, where he laid out a vision for a tool that could transform how the bank stores and accesses institutional info.  

“Within a corporation, most knowledge is not codified. It’s tribal,” Argenti wrote. “It resides in the minds of ‘experts,’ connected by an internal social network that takes years to master.”  

That obviously has its downsides: It’s difficult to know where to find key info, and it can be lost completely when employees leave. However, a “ChatGS” system that allows users to add and query information via natural language could make it easier for it to be recorded, stored, and made accessible. 

By removing the manual processes or specificity needed to update and search more traditional corporate knowledge management systems, this strategy could break down information silos. In that way, large language models (LLMs) are “a breakthrough in knowledge more than they are in productivity,” Argenti said.  

Internal knowledge sharing is just one way that financial institutions are thinking about using large language models and generative AI: 

For example, Bloomberg is working on a tool that would let its terminal clients quickly retrieve proprietary information and ask financial-analysis questions, Morgan Stanley is giving its advisors access to a tool that synthesizes its research, Swedish investment firm EQT programmed a chatbot to help its dealmakers benefit from its “Motherbrain” data platform, and fintech Klarna has deployed it externally for shopping recommendations.    

There’s a renewed push on Wall Street to collaboratively test how blockchain technology could make financial transactions more efficient, in a low-risk way.

There’s a new project among a group of investment management firms to test the benefits of blockchain-based trade execution and settlement.  

T. Rowe Price, Cumberland, WisdomTree, and Wellington Management Group have kicked off an experiment to use Ava Labs’ Avalanche Evergreen Subnet “Spruce” to execute foreign exchange and interest rate swaps. This joint effort between stakeholders is noteworthy, as institutional blockchain efforts have often not been interoperable.  

Spruce purports to reduce costs and cut down on counterparty risk through simultaneous and instant settlement, permissioning based on know-your-customer certifications, geofencing, custom gas token selection, and more.  

“These features have been tailored to financial institutions’ needs after in-depth discussions with industry leaders on their prior challenges regarding broader public blockchain adoption,” Ava Labs director of business development for institutions and capital markets, Morgan Krupetsky, told Insights Distilled.  

The test project, which involves valueless tokens, “is an opportunity for us to really begin to explore … in a super low-risk environment, where there’s no capital at risk,” T. Rowe Price’s head of digital assets strategy, Blue Macellari, told Bloomberg.  

While the heyday of financial firms’ blockchain projects has faded, the comparative lack of hype actually makes it a good time for education, experimentation, and partnerships.  

With funding from Vanguard and Insight Partners, among others, Altruist is betting that its all-in-one software stack can save registered investment advisors (RIAs) time, money, and manual work. The lesson for legacy players? Modernize or partner up.

Watch out incumbents: Altruist aims to be the modern custodian for RIAs.  

It posits that “legacy custodians have little incentive to innovate and rebuild technology,” which hampers advisors’ potential reach. By comparison, its platform can be a “game-changer.”  

Altruist says that its integrated clearing, custody, and advisory tools help advisors eliminate disjointed software, paper processes, and high operational costs.  

“It’s a deeply technical problem at every level that the team has solved with an intuitive user experience that’s unlike anything the RIA industry has ever seen,” according to Insight Partners managing director Jonathan Rosenbaum.  

The company’s $112 million Series D was led by Insight Partners and included industry leaders Bill McNabb, Ron Carson, and Marty Bicknell. The firm also disclosed a $110 Series C from November 2021 led by Declaration Partners, with participation from Vanguard.   

Altruist will use its fresh funding to expand its capabilities in portfolio management automation and personalization for clients, among other things. As of now, it has 3,300 RIAs using its platform and aims to increase its slice of the RIA market, which has $128 trillion in assets under management.  

So-called digital sandboxes – or self-contained test environments with synthetic data and prototyping tools – can take the pain out of proof-of-concepts for startups eager to work within the financial industry.

The chief data, information, and intelligence officer of the UK’s Financial Conduct Authority just announced that the FCA will work with upstart NayaOne to build a safe, efficient way to test fintech products.  

The move to create a permanent sandbox follows several successful pilots. It also comes less than a year after the US Consumer Financial Protection Bureau decided to shut down its own fintech-focused sandbox, which was unpopular with consumer protection groups and deemed “ineffective” by the CFPB. 

The FCA’s sandbox will give fintechs access to over 200 assets that they can use to test their tools, prove their products work and can protect consumers, and be a launch point for potential long-term partnerships. The regulator is particularly interested in tools that could help solve issues with authorized push payments fraud, greenwashing, and other scams.  

“One of the primary reasons we invest in tech and innovation is to provide better support and to regulate,” exec Jessica Rusu said. “The FCA digital transformation programs are centered on driving efficiencies and reducing the regulatory burden for firms.” 

Through its sandboxing tools, NayaOne promises to help firms test out tech for the highly regulated financial services industry securely, in less time, and at a lower cost. The firm announced a similar partnership with Lloyds Banking Group late last year.  

Clear Street has raised fresh funding – including from market maker IMC Financial – to replaced outdated infrastructure through its prime brokerage and clearing systems, which will help with “maximizing returns and minimizing risk and cost for clients.”

Clear Street is building the “modern infrastructure” for capital markets – and just raised a boatload of fresh funding to help the US securities industry break away from mainframe technology.  

Its platform integrates clearing, custody, prime financing, and execution for US-based institutional investors, with real-time processing (versus the traditional batch processing), automation, and integration of data.  

“Today our platform supports US equities and options, but the goal is to be a single-source-of-truth that supports any asset class, any geography, for anyone,” chief operating officer Andy Volz told Insights Distilled.  

While the company declined to name specific customers, it said that its prime clearing platform currently processes about $10 billion in daily notional trading value, or about 2.5% of the US equities volume.  

Execs from Fidelity, Citi, and Kaplan say that generative AI will have a huge impact on efficiency and financial education, but it won’t replace the advisor-client relationship. 

Morgan Stanley made waves when it announced last month that it’s letting its wealth management advisors use ChatGPT – the buzzy tool that can answer questions in a human-like way – to work more efficiently. The firm trained ChatGPT on about 100,000 pieces of its own proprietary research, so that its advisors can easily retrieve and digest large amounts of data without manually combing through reports.  

Now, execs from other wealth management firms are chiming in with ways that they think AI will reshape the industry.  

For one, these tools will revolutionize financial education, Fidelity’s vice president of AI research, Sarah Hoffman, told Bloomberg. “While we may not want these tools to advise customers directly, they can help educate employees,” she said, “And even help customers prepare before they meet with representatives, so they can ask better questions.” 

Citi Global Wealth’s chief investment officer, David Bailin, agreed that AI “will absolutely improve client education” and reduce the time it takes for advisors to complete repetitive tasks. For example, adding relevant content to client communications or digesting firm research. “It will be an incredible efficiency generator,” he said.  

However, artificial intelligence won’t be able to replace human-to-human relationships, because wealth management is such a deeply personal and emotional topic, according to Kaplan Financial Services president Susan Kaplan.  

After all, there’s nuance to a person’s financial situation that AI won’t be able to parse, people want to talk to someone they trust about big financial decisions, and pure profit-optimization doesn’t always best other priorities. That’s why many big firms like JPMorgan even hire behavioral scientists to help advise top clients.  

“Often the ‘right answer’ is not mysterious, but convincing the client that it is necessary for the future of the family is the trick,” Kaplan said. “That is the moment that the psychological connection with the client and the family is the linchpin of success in the financial planning process.”  

For more insights on the future of wealth management, check out Bloomberg’s round-up here.