February 7

Always prepare for the worst: An attack on technology-plumbing provider ION underscores how crucial it is to have systems in place to keep markets whirring regardless of partner issues. Make sure your firm has preparation, documentation, and a path forward from disruption.  

The derivatives trading market was teleported back to the 1980s in the past week as London-based ION Trading succumbed to a ransomware cyberattack from extortion group LockBit. With ION’s software locked up, traders and brokers around the world were forced to manually process deals using spreadsheets, telephone calls, and their own ad-hoc software. 

The interconnectedness of the markets and the many partnerships involved means that firms must have backup plans and fallbacks in case of outages like ION’s, to avoid dramatic ripple effects. While the incident has caused difficulties and delays, it has not turned into a major contagion or systemic risk for the entire financial system, thanks to people’s quick adjustments.  

The moral of the story? Companies need to take the position that they (or their partners) will inevitably be attacked and form a plan for continuity and recovery that avoids significant damage. 

“Cybersecurity is a means to an end, but really, what you need is your business to keep going following a cyber incident,” James Hadley, CEO of Insight Partners’ portfolio company Immersive Labs, previously told Insights Distilled. After all, financial services is the most targeted industry for cyberattacks, according to recent research. 

“Many large financial firms may think they are immune from ransomware because of all the resources they have invested in security. But, even if your organization is well-protected, your partners and vendors may not be,” intelligence analyst Allan Liska at Insight Partners’ portfolio company Recorded Future told Distilled.   

LockBit said over the weekend that it received a ransom and unlocked ION’s files, but ION is planning to rebuild new infrastructure for its derivatives platform instead of returning to the previous system, according to The Trade News. 

While it’s still unclear how LockBit first gained access to ION, the group has used attacks like “spear phishing” or other “malware-as-a-service” tools in the past, senior security expert for Kaspersky’s global research and analysis team, Marc Rivero, told Insights Distilled. Firms should “ensure employees are aware of phishing attacks, malware in general, and other basics of cybersecurity” to protect themselves.  

ChatGPT – the AI-powered tool that can respond to prompts and queries in a human-like way – can help make vast proprietary datasets more accessible: Non-techies can get quick answers without relying on data scientists.  

Sweden-based EQT, which invests in technology, healthcare, real estate, and infrastructure businesses, is using ChatGPT to streamline the use of its extensive data platform, dubbed Motherbrain.  

The platform launched in 2016 and contains hundreds of millions of data points on companies, people, and their connections. Deal makers previously relied on the ~30 engineers and data scientists managing Motherbrain to access it and identify potential opportunities, but ChatGPT streamlines the process. Now, investors (and EQT’s portfolio companies) can query the platform directly and ask more open-ended questions. 

“Founders, for example, could ask ChatGPT to create a list of chief revenue officers who scaled their company to $50 million in revenue in London,” reports Insider.  

By making it easy for investors to benefit from Motherbrain’s extraordinary amounts of data, EQT is “trying to make cyborgs,” executive Alexandra Lutz told Insider. Combining workers’ instincts and connections with data access makes them better at their jobs.    

ChatGPT will likely play a key role for financial firms in the future, whether through collecting and analyzing client data, super-charging existing customer service chatbots, generating personalized financial management features, or aiding cybersecurity and fraud prevention. For now, EQT’s application of the technology is a great example of how it can create an impact in the near-term. 

US Bank wants to make it dead-simple for new customers to deposit their paychecks into its checking accounts, as FinServs vie for loyalty and people pick up new gigs.   

US Bank is partnering with payroll startup Atomic to save time for new customers (or those with a fresh side hustle).   

Instead of manually filling out routing and account numbers to set up a direct deposit, US Bank clients will be able to automate the process from within the bank’s website and app by searching for and logging in with their payroll provider. This speeds up an otherwise tedious routine, according to the bank.  

“Our new DIY direct deposit feature is yet another way we are helping our clients save time and simplify banking,” said vice chair of consumer and business banking Tim Welsh. 

Beyond new US Bank clients, the tool is particularly useful for existing customers who are picking up gig work or have just landed a new job, and early data shows that it’s already a popular feature.  

The bank evaluated several options before deciding to collaborate with Atomic, according to SVP and head of digital sales Jonathan Burns.  

“We were confident from the beginning that our combined team talents, backgrounds, and agile culture would power us to jointly succeed in breaking down customer friction and barriers when it comes to payroll deposit switching,” he told Insights Distilled. The feature builds on US Bank’s larger account opening initiatives, which allow people to digitally apply for checking accounts in minutes.  

Atomic is “actively working” with other large financial institutions on similar offerings, Atomic CEO Jordan Wright told Distilled, adding that there are clear benefits for banks of making deposit switching easy.   

Lower friction can lead to “higher direct deposit conversion rates, cost savings from maintaining unfunded accounts, and increased active usage and product engagement across bill pay and auto-payment,” Wright said. “All leading to deeper customer relationships and higher life-time value.” 

Small businesses have historically felt underserved by their financial institutions, which has led to an increase in efforts to offer tools like personalized analytics and business projections.

American Express just launched a new digital cashflow-management hub for its small business customers – called Business Blueprint – that builds off its 2020 acquisition of SMB lender Kabbage.  

The tool includes cashflow analysis, two years of historical transaction data, expense alerts notifying customers of increased spend, 30-day cash-balance projections, and an easy way to apply for products like credit lines. 

The tools originated with Kabbage, but have received enhancements and additional features since the acquisition.  

“Many of the core Kabbage team members continue to build this within Amex,” a spokesperson told Insights Distilled. 

The new hub fits with Amex’s “vision of becoming a digital one-stop shop for small businesses’ financial needs,” according to exec Anna Marrs. Trying to win over the SMB market has become a priority for a host of other banks as of late, sparking an influx of innovative digital tools and partnerships.  

For example, Westpac is working with Rich Data Co on AI-powered business loans, Standard Chartered has partnered with upSWOT on personalized tools for SMBs, US Bank has worked with an unnamed fintech to help SMBs predict their future cashflow, and Barclays is partnering with UK fintech Liberis to make cash advances faster and easier. 

Although quantum computing is still in its early innings, canny financial institutions are finding low-intensity outlets for experimentation and skills-building.

Credit Agricole’s corporate and investment banking arm has successfully completed two experiments that found that it could achieve “faster valuations and more accurate risk assessments” using quantum computing techniques. Quantum is an emerging computing paradigm that promises to perform calculations at blistering speeds.  

The bank initiated the two experiments – around valuing derivatives and anticipating the downgrades of financial ratings – in June 2021 alongside partners Pasqal and Multiverse Computing. It just released the results that it found the experiments to be “very successful.”  

“These two proofs-of-concept demonstrated the potential and reality of quantum computing for finance, despite these technologies still being in their infancy,” Credit Agricole exec Ali El Hamidi said. “We took advantage of this initiative to start developing the internal skills to prepare for a technological breakthrough which, if it happens, will have a direct and decisive impact on competitiveness in our sector.” 

Meanwhile, the likes of HSBC, JPMorgan, and Ally are also experimenting with ways to use quantum computing technology for their benefit, like improving speed and precision of risk analysis, while Banque de France is preparing to protect itself against encryption-breaking quantum tactics.  

Learn more about Credit Agricole’s experiments.