March Madness: The Financial Technology Trends Tournament

Dan analyzes eight of the biggest trends in the space.

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In honor of the upcoming men's and women's NCAA basketball tournament, Dan designs his own bracket specific to financial technology.

The calendar has turned to March, which can only mean one thing: The madness is officially upon us. 

On Thursday (no, I don't count the "First Four" as the start of the tournament), we'll start with 64 teams, all, to varying degrees, believing they have a shot at a national title. Four days and 48 games later, there will only be 16 left, many of which will not have been expected to make it as far as they did. What a time to be alive!

I could wax poetic about the NCAA tournament forever, but these columns are about technology in the capital markets. That's why I'm going to piggyback on the popularity of NCAA tournament and make a bracket of my own.

I'm a big-picture guy, so I like to look at trends that are gaining steam in the industry. I picked eight topics that are fairly big in the financial technology space, seeded them, and pitted them against each other.

Without further ado, your 2016 Financial Technology Trends (FTT) tournament bracket!

 

First Round


No. 1 Bitcoin/Blockchain vs. No. 8 Fixed-Income Trading

There is a reason these two are seeded where they are. Bitcoin/blockchain and fixed-income trading are a world apart. There are plenty of interesting technology issues in the fixed-income space, but those pale in comparison to the chatter around the potential use-cases for bitcoin and blockchain in financial services.

This is one of those games where it's over as soon as two teams line up for the opening tip. Bitcoin/blockchain in a landslide.

Winner: Bitcoin/Blockchain


No. 2 Big Data Analytics vs. No. 7 Mergers

As the unparalleled former Buy-Side Technology editor Tim Bourgaize Murray once said, "A day in financial technology without an acquisition is like an afternoon in London without a little rain: It happens, but not often." That sentiment has been especially true in recent months, specifically, as US editor Anthony Malakian and I discussed last week, when it comes to risk platforms servicing the buy side. However, the ability to leverage big data is on the forefront of every financial firm's agenda. Firms are looking to really take advantage of the big data platforms they've spent the last few years building. 

Gonzaga is the NCAA equivalent of mergers, always in the tournament, but never really in the conversation. On the other hand, big data analytics is a true rising star in the bracket. It makes it on to the next round comfortably.

Winner: Big Data Analytics


No. 3 Cybersecurity vs. No. 6 Machine Learning

Classic match-up between old hot trend (cybersecurity) and new hot trend (machine learning). Cyber was all the rage 16 months ago, but the topic has cooled down. It's still a major issue, but it's one that firms are much more aware of than they were five years ago. Machine learning is a new up-and-comer with plenty of potential, as detailed by Anthony in a recent feature. While many would argue the hype around cybersecurity has already peaked, there is no denying the ceiling for machine learning is still unclear.

In an upset, the upstart takes down the established. Machine learning on a buzzer-beater.

Winner: Machine Learning

 

No. 4 MiFID II vs. No. 5 Dark Pools/High-Frequency Trading

In one corner we have a topic that first took the mainstream spotlight a couple years ago and has managed to stay in the public eye, whether it be for good reasons or bad, on a consistent basis. In the other, we have a massive European regulation that was delayed in the fall and won't be enforced until January 2018. While interest in MiFID II has continued to climb, its implementation date is still almost 22 months away. HFT and dark pools are more consistent issues, whether it's new regulations affecting them, or the technology backing them.

Just like Duke, you might not like HFT, but it's always going to be a contender. The speed guys move on.

Winner: Dark Pools/High-Frequency Trading

 

Second Round

 

No. 1 Blockchain vs No. 5 Dark Pools/High-Frequency Trading

If this was HFT from 2014, we might have a real fight on our hands, but it's not. Bitcoin/blockchain is just too hot in the streets right now.

Winner: Blockchain/Bitcoin

 

No. 2 Big Data Analytics vs. No. 6 Machine Learning

Can the Cinderella story continue?

No. Maybe in a few years, but right now big data analytics are much more important to firms' immediate future.

Winner: Big Data Analytics

 

Final

 

No. 1 Blockchain vs. No. 2 Big Data Analytics

You kind of knew it was always going to come to this. Favorites don't always fair well in the NCAA tournament, but sometimes there are just two powerhouses that seem destined to meet. That was the case here. Both technologies account for an innumerable amount of projects currently under way in financial services.

The differentiator, however, is actual use-cases. And while plenty of firms will tout their proofs of concepts around the blockchain, big data analytics are already an integral part of most financial firms. That's why it will be big data analytics cutting down the nets this year and taking home the first FTT title. Cue the music!

Winner: Big Data Analytics


 

 

This week on the Waters Wavelength podcast ─ Episode 8: Consolidation of Risk Platforms, Open Source

If you haven't already, subscribe to the podcast on iTunes here. Also, check out our SoundCloud account here.

 

Food for Thought

  • As for the actual tournaments: On the men's side I like Michigan State. The Spartans will be fueled by the disrepect they feel from not getting a one seed. For the women, UConn. 'Nuff said. For my Final Four picks, listen to Thursday's Waters Wavelength podcast.


Like the column? Hate the column? Let me know via email ([email protected]) or Twitter (@dandefrancesco).

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