RiskTech Forum

Numerix: The Need to Balance Today’s Financial Technology Age with a Human Element

Posted: 20 June 2019  |  Author: Steven O’Hanlon  |  Source: Numerix


As I gathered my thoughts about the capital markets before writing this post, a song from the musical film Cabaret came to mind: “money makes the world go round.”

That was Liza Minnelli’s ode to the power of money, but the correlation I’m making is that the capital markets are the engine that drives most of the world’s money, whether, to quote from the song, it’s “a mark, a yen, a buck, or a pound.” And the global capital markets today are larger and more dynamic than they have ever been, and hold even more enormous power and control in shaping the prosperity and economic influence of nations and industries across the world. The capital markets are also undergoing tremendous change and disruption, and much of it is driven by the new digital age and the corresponding emerging technologies coming out of the fintech space. In fact, I believe that if you look at all industry segments and ask which is the one that might be the most disrupted by technology right now, the #1 answer may very well be financial services.

E-trading, cloud computing, big data, blockchain, artificial intelligence and machine learning are transforming the way financial institutions conduct business—and these innovations are being used for uses ranging from derivatives trading to financial planning to lending and payments, and more. Indeed, this digital and robotics age is an exciting time. We already see the very significant impact new tech has had on the capital markets and why financial institutions continue to invest heavily into it. Operational efficiency has been enormously enhanced, risk is being better managed for all types of market participants, many time-consuming manual tasks—as well as human error—have been minimized and in many cases eliminated. In fact, tech advancements are so rapid that I bet in a few years from now this very discussion might be different.

The technology story is huge and there is no doubt fintech is one of the fastest growing industries, but the conversation I do not hear is about the component that skirts the technology used in the capital markets—the human element, and it is something that no technology can currently replace. I do acknowledge, however, that a big, lingering question is whether robots will ever replace humans in most (if not every) area of our working lives—and I think it is a question that is the stuff of science fiction stories. As for an answer, though, I say that for today and the foreseeable future, it is no.

While technology advances, such as those I mention above, are both amazing and fascinating, I am struck by how little seems to be said about the human role and how it fits into this quickly evolving world of the high-tech customer experience. And even though it is clear that the future of the capital markets and fintech will be going farther in the direction of digitization, robotization, automation and automated decision-making, I believe an effective balance needs to be struck between technology and human interaction to create a better, safer, more rewarding, and yes, more profitable experience for customers.

What I mean by balance is we need to understand and acknowledge there are areas that technology does better than humans and areas it does not. One needs the other in the right “balance” to create the most powerful and practical influence and desired results.

The Fintech Example
I run a fintech company named Numerix that provides capital markets technology solutions for derivatives trading and risk management. Our clients include banks, asset managers, insurance companies and pensions. While I’m in the business of delivering digital technologies to the financial services market, I do everything I can to ensure Numerix creates a great client experience and a more efficient and productive financial services community, as opposed to just worrying about making a system work or getting a product live. I think that’s important.

To truly succeed, our brand must deliver experiences via the perfect mix of technology and the human relationship. While our market craves innovation, and our constituents truly value our tech expertise, it also wants the advice, responsiveness, creativity and problem-solving collaboration that comes by partnering with a Numerix professional, whether it be one of our financial engineers, one of our quants or software developers, or someone in sales. As of now, only people fully deliver soft skills. A human touch provides customers with the comfort level they need in order to trust and have confidence in the technology and its results.

The human element in the office environment matters, too, in terms of the way you lead and manage people. We foster a culture in Numerix in which we give employees room to use their brain, use their initiative, use their intelligence, wisdom and creativity, and that directly feeds into the quality of our industry-leading technology and the greatness of our brand.

Furthermore, we apply our client philosophy internally in terms of leveraging our inhouse talent and innovative thinking to create technologies that improve our own operations and processes and to generally make better business decisions.

Relationships Still Matter
In financial services, “relationship currency” continues to hold enormous value. Let’s use trading as one example. While a lot of trading is being pushed onto electronic venues, voice trading (such as trading over the phone) is still preferred for the trading of complex products and large-size, large-margin tickets. It helps traders convey to clients the nuances behind complicated trades, particularly those that involve multiple parties. So the human voice still matters in terms of building trust and developing strong relationships with clients and brokers. According to a 2018 Greenwich Associates survey of 47 fixed income trading desks, 82% of the desks indicated they differentiate themselves through the strength of their client relationships.

Another example: the masses still believe that the human touch is important when receiving financial advice. According to recent study conducted by Northwestern Mutual, the established value of human advice in financial planning is not easily being replaced by technology. According to the study’s findings, when asked how they would prefer to receive financial advice, the majority (54%) of respondents (across several age groups, including millennials) said the ideal solution combines a human relationship with technology while a full third (33%) prioritized a human relationship above all else. Notably, the appetite for a fully automated (robo advisor) solution appears low across all age groups used in the study.

Clearly, personalization is extremely important when it comes to money. Automated systems cannot understand the emotional meaning of an individual’s financial goals (such as for retirement) nor the impact of major life events (marriage, having children) on a person’s financial circumstances. I don’t think there is an app yet that can produce an effective plan to cope with any breaking points in one’s finances.

Why the Digital Experience Needs a Human Touch
In my view, it’s important to understand that the digitization of the world can only offer so much. Human interactions are what build personal connections—and these are ultimately what customers remember and appreciate. If financial services institutions, as well as their fintech partners (or challengers), are looking for ways to stand out from the crowd, incorporating more of the human element into their corporate strategy may just help them achieve a fuller meaning and more potential in the industry.

After all, don’t you want your clients to regard your company as not just a great tech firm or a firm with great technology, but one with great people?