FinTech

Specialised in
Wealth
Management and
Capital Markets WealthTech
Dr. Neeraj Amarnani

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Financial Services Framework
Payment Savings & Risk Manage-
Credit
Systems Investments ment

Decision Support

Infrastructure

Legal framework
 Classification
by asset class
Capital
Markets Stock market Debt market
Commodities Derivatives
Forex market
market market

Core Infrastructure of Capital markets are the systems and technologies that
connect asset holders and intermediaries
 Capital Markets
Classification by
nature of
transaction

A number of primary market

functions are performed by
Secondary
Investment Banks.
Primary Market
Many of these functions are
being affected by financial
Market
technologies and innovations
 Capital markets (as with other parts of the financial
system) designed and built in pre-digital era.

Leads to complexity in their functioning

Capital
Markets:
Ripe for
Disruption Some areas with greatest scope for improvement

Asset New Financial

Settlement
Ownership Instruments
 • Shares issued digitally via the
blockchain and tied to the owners’
Potential and/or brokers’ identity not an
intermediary or custodian (as
Disruptions: presently done)
• Faster settlement and elimination of
Asset paper certificates would reduce costs
Ownership • Most importantly share owners would
be able to ensure all the rights
granted by ownership
 • Ownership transfer & payments simultaneous,
reducing counterparty risk from days to
potentially minutes; counterparty risk reduced
by embedded information
Potential • Smart contracts – machine to machine
settlement - could eliminate significant manual
Disruptions: confirmations
• Real time monitoring facility to regulators
Settlement &
Reconciliation • Some downsides
• Reduced floats compromise broker driven &
HFT float-based transactions
• Reversing transactions due to programming
errors a nightmare in blockchains
 • More niche derivatives available as more
asset-ownerships get digitised
• Secondary markets become easier to
create for these assets
Potential • Company needs could get broken down
into individual cash flows, bundled to
Disruptions: create new swaps

New • Smart contracts will enhance financial

engineering possibilities
Financial • Risk reduction through non-
discriminatory execution
Instruments • Cheap, previously agreed method to
ensure all parts of a contract are
fulfilled without interference
• NFTs are one of the use cases
 • Access traditionally controlled by
intermediaries, experts and
professionals
• Financial technologies have / are
Evolving • making trading more accessible,
Disruptions: • supporting decision making
• Improving transactions execution
Access
• Technologies such as AI and BDA
creating new opportunities for
innovation on this front
 • Algo / Automated Trading: use of algo / specific set
of instructions that guide trading of assets. Speeds
not comparable to human trading
• Benefits of Algo trading
• Trades may be executed at best possible prices

AI: Basis for • Increased accuracy and reduced chance of

mistakes
• Automatic & simultaneous check of multiple
Algorithmic market conditions
• Reduced impact of human emotional and
Trading psychological biases leading to errors
• Automated investment management
• Portfolio created for client based on
algorithms
• Reduced front end intervention by asset
manager
• High frequency trading (and Flash Crashes)
 Impact of • New technologies and

FinTech digital platforms are

some of the many
fintech innovations

Innovation on impacting markets:

• Better solutions to
customers
Capital Markets • Emerging Products, Firms
and Services
 • Robo-advisory/Digital Advisory Services
• Financial Planning and Advisory services
that are
• Automated, and driven by
• Artificial Intelligence
• Discount/Digital Brokerage Services
• Virtual brokerage services offering clients
Categories of trading at lower costs
• Personal Financial Management
Wealthtech • Allows collation and access to information
for multiple asset classes
Solutions • Software based money management tools
• Investment Platforms
• Make and manage investments across
platforms
• Alternative Investments
• Access to assets / classes otherwise
unavailable to larger groups of investors
• B2B Software solutions
 • Robinhood: a tech-driven broker that reduces
the cost of trading for consumers
• Freemium model: no charges for basic services of
trading, some charges for value-added products
• Earnings through
• Commissions from market making brokers for
Digital/ lead generation - Termed as Payments for
Order Flow
Discount • Deposits (interests earned on the float)
• At 4 million customers, quite a possibility here
Brokerages • Charges for margin trading facilities
• Zerodha in the Indian context
• Freemium model: Reported Rs 6,870 crore in
operating revenues and Rs 2,900 crores in profits in
FY’23
• No startup capital raised: bootstrapped venture
• Other Indian players: Groww, Upstox
 • Kuvera
• Mobile-first mutual investment platform
• Also provides investments options in Indian and US
stocks through tie-ups
• Scripbox
• Curated funds portfolio driven by algorithmic analytics
• Orientation towards life goals and risk tolerance
• SmallCase
Investment • Investment baskets of stocks, ETFs based on themes,
strategies
Platforms • Sold mostly through broker tie-ups
• Portfolios provided by a number of investment advisors
• Acorns
• Essentially started out as spare change investment
services oriented towards young savers
• Has since expanded into checking accounts
• Stockpile
• Investment designed for families, with trading accounts
accessible to children, controlled by their guardians
• Facilitates fractional holding of investments
 • Betterment
• Automated investments in low-cost, pre-
Personal built portfolios
• Also offers checking accounts
investing: • Options to talk to advisors for further
inputs
Robo • Wealthfront
advisory and • Automated investment solutions with
emphasis on bond funds
Financial • Also offer products on cash, index and
stock investments
planning • Stash
• Personalised, low cost investments
• Targetted at first time/young investors
 • Sensibull
• Options trading platform
• Connected through broker accounts
• GripInvest
• Platform for curated investments beyond stocks
and FDs
• Bonds, Securitised debt, Commercial property,
Alternative startup equity
• Streak.tech
Investments • Alorithmic trading platform with strategies mostly
on technical basis
• Allows scanners, backtesting and development of
own strategies
• Vested
• Allow investments in US stocks
• Also provide opportunities to invest in P2P lending,
Bonds, Solar rooftop panels.
 • eToro
• Social Trading and Multi-asset
investment platform
• Includes copy investing and popular
investor programmes
• Pelican Trading
Social Trading • Copy trading platform
• Connects to existing trading account
• Zulu Trade
• Copy trading platform
• Encourages successful
investors/traders to list on platform
to get followers – earn from trading
volumes as well as profit sharing
 • Addepar
• Multi-source data feed compiled to enable financial
planners/advisors to consolidate reporting across
countries and asset classes, helping manage
complex portfolios
• Additiv
• B2B robo advisors, Portfolio management tools,
Risk analysis and management
• digitizes the entire value chain to offer wealth
management services and insurance from one
central platform.
B2B Solutions • CAIS
• Leading alternative investment management
platform
• Provides financial planners/advisors with a range of
alternate asset classes and information for their
clients
• Provides alternate asset managers with a new
segment of clientele.
• Investsuite
• Range of B2B white-label and API driven solutions
for financial institutions to offer financial
management services.
Niche Business
Models (selected)

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Wisdom of the
Crowds….
 • Make use of connections and network intelligence to
aggregate data to best predict possible future events:
price of assets, funds, stocks as well as real world
events
• Allow individuals to trade assets based on
outcome of a particular event
Prediction • Have a long history; received strong propulsion
from increased connectivity and social networks
Markets • Relies on idea that while individuals may not be able
to predict outcomes, consensus view is highly likely to
be correct
• i.e. ‘Wisdom of the Crowds’
• Eg: AUGUR, Kalshi.com, earlier Iowa Electronic
Exchange, Hollywood Stk Ex, Polymarket and others
 • https://youtu.be/jYLgRo8upO0?t=127
Prediction
Markets
Prediction Markets

• https://youtu.be/jYLgRo8upO0?t=127
 • Process by which investors who want to trade
generate info from other online investors
• Some studies show social traders on some
platforms generate as much as 30% more
returns
• Social Trading / Copy Trading platforms include
Social Trading • Internationally: eToro, Pelican Trading,
ZuluTrade
• Note of caution: (Prof Alex Pentland, MIT):
• Experimented with robotic AI, to create
mini-bubbles
• Effect: Investment of $1 managed to drive
up market cap by upto $ 5,000 !!
AI, Analytics and Sentiments

• Hedge funds among the first to

adopt prediction markets
• Eg:
• Numerai – and numeraire
too….
• Sentient Investment
Management (closed down)
• Other Business Models
• Sentifi (Analytics services)
 • Using Crowdsourced Data Science to build a
hedge fund.
• Conduct Numerai Tournament
• Data scientists invited to ML models on
abstract financial data, and invited to
take stakes using proprietory
cryptocurrency Numeraire
Numerai • Combined staked model forms the Meta
Model to control the capital of Numerai
hedge fund across global stock markets.
• One can earn or burn the stake
depending on performance of the model
submitted.
• Claim past returns on staked NMR is
>15% p.a.
 • Using collective Intelligence – Sentiment
Analysis - for better investments
• Intelligence Products
• Company Analytics and Market Analytics
• Institutional Services / Products
• For Discretionary Asset Managers - Research,
Porfolio Monitoring, Validating House View)
Sentifi • For Quanitative Asset Managers – Design
Strategies, Generate Alpha, Extensive Data Sets
• For Risk & Reg Professionals – Ad hoc
Surveillance, Early detection, Peer Group
Analysis
• Retail Services
• Portfolio tracking and analysis
Thank you!!!
Neeraj Amarnani