Sunday, May 8, 2016
Chishti and Barberis, The FinTech Book
The FinTech Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries, edited by Susanne Chishti and Janos Barberis (Wiley, 2016), addresses multiple aspects of this disruptive technology—or, better, technologies—in developed as well as emerging markets. It highlights the kinds of applications that can either challenge the very existence of traditional banks or be incorporated into, and thereby radically change, mainstream banking. It analyzes commerce—payment systems, B2B transactions, identity theft—and investment—crowdfunding, marketplace lending, robo advisors, crowdsourced alpha. And, of course, crypto-currencies and blockchains.
This book is not at all technical. It was written not for quants (although the next paragraph may seem to belie this claim) but for people who are either simply curious about the status and possible future course of financial technology or who might want to get aboard this trend, as entrepreneurs or investors.
One chapter that caught my fancy was “To Crowdsource a Hedge Fund” by Andrew Campbell, data analyst at Quantopian. Campbell suggests a quant crowdsourcing platform with “a robust all-in-one algorithm creation and comparison package…. When a platform for researching, writing, back-testing, deploying, and comparing trading strategies becomes an investor in its own user base, a symbiosis emerges. The quants get a free platform for researching and writing algorithms that will always remain their own intellectual property and the chance to win significant capital backing. While the rest of the world is left analyzing quarterly returns on a few dozen strategies, the platform-investor gets to build their portfolio by looking minutely at returns from hundreds of thousands of strategies. With this mass of data in hand, a fund can more accurately invest in the strong and uncorrelated algorithms needed to form an elegantly diversified portfolio.”
Social investment networks exist already, of course. Yoni Assia, the founder and CEO of the world’s largest such network, the eToro OpenBook, writes a chapter about the success of his enterprise.
The FinTech Book is at heart an idea book, which is why visionaries were included in its self-defined audience, along with investors and entrepreneurs. Financial technology might not be as world changing as DNA editing, but it will fundamentally transform the way we interact with all things economic. And that’s a big chunk of our world.