On AI and machine learning for credit risk, Startups and scaleups, and Gaming and gamification.

Personal reflections and curation on the subject, and on the fly.

Columbus, OH – September 12, 2017:  After a rigorous global sourcing process and rounds of technical and qualitative reviews, Fintech71 has officially chosen its inaugural cohort of financial technology startups. The 10 startups were formally announced today at Finovate in New York City.

The announcement coincides with more corporate partners declaring support for the effort. In the last few weeks, Accenture, Klarna Inc., Westfield Insurance and Corporate One Federal Credit Union Inc. have also joined the extensive ranks of the private sector partners.

A surprisingly refreshing take on a subject close to my heart. Companies like #James by CrowdProcess matching cutting edge technology with an existing reality. The input for the system is the data you have, and it is with that data that the machinery runs and is able to increase origination vols, decrease charge off and default rates and lowers operational costs. No black box, no reg issues, no novel outside data to be used. We make you better at what you already well.

“Artificial intelligence is changing the world and doing it at breakneck speed. The promise is that intelligent machines will be able to do every task better and more cheaply than humans. Rightly or wrongly, one industry after another is falling under its spell, even though few have benefited significantly so far.”

There is light at the end of the AI tunnel, also for custodian banks. Never too late, for sure.

“Ultimately, custodians may need to invest in technology to survive, Campenon said. Because of the aggressive automation and adoption of innovative technology that Campenon said clients expect to be occurring at their custody banks, 80% of respondents in the BNP Paribas survey said that they believe there will be fewer custody service providers in the next three years, as those that fail to invest in technology will cease to exist.”

It’s called Teaser Rates for a reason…

“For example,the company’s website boasts that term loans of up to $500,000 can be obtained with annual interest rates as low as 5.99%. Newman said that when he contacted OnDeck, he was hoping to get a loan at such a rate. But it didn’t work out that way.”

Of course not, it never does. That is no different than at any other bank advertising these same low teaser rates which you never get, or airlines advertising rock bottom prices only to find out that they are “no longer available…” or some other lame excuse. (Sleazy) marketing 101, but don’t come down on this and pretend it’s unethical. It’s business as usual.

Happy to be leading the US charge for this amazing startup.

James by CrowdProcess is a data science company mainly focused on the financial services industry. Its full team is composed of 18 people, based in Lisbon and New York, covering all necessary skills from design, business development, machine learning research and product engineering. As a product of its consulting experience, CrowdProcess developed James, its flagship product which is being marketed all over Europe and North America with the intention of expanding its commercial efforts globally as of this year.

Reach out to me directly if you’d like to know more.

AIaaS is the new acronym it seems. Anyway, by all means, $100M+ continues to be a nice chunk of change in my book - so feels like “somethin’s up?” indeed. We’re going to need all the AI help we can get if we are to get out of this increasingly insane partisanship situation in this country. If not - we have only one way to go, and that is Eastwards. The Chinese know that very well, and they are very patient - we are not. At the end of the day, it’s a numbers game, and we are NOT winning. #James #CrowdProcess

Not sure why people are “surprised” by this - as Amazon (and all other FAANG members) are so deep into AI and machine learning, it’s getting scary. Not that long ago, from another article, the following: “Amazon Web Services CEO Andy Jassy stressed that Amazon itself has a lot of background in machine learning, even though the company hasn’t always talked about it. “We do a lot of AI in our company,” he said. “We have thousands of people dedicated to AI in our business.”” Thousands of people … yup.

Amazon Uses Its Machine Learning Tools for Lending

When talking about machine learning algorithms, Amazon definitely comes to mind. The e-commerce giant has (arguably) the most sophisticated ML toolset around that is uses for drone deliveries, online tailors, or its AWS offering. Turns out, Amazon's lesser known operation - small business lending - is also powered by machine learning, Bank Innovation has learned.

Interesting take on the subject from the guys at Orchard (full disclosure - I know them well), though I not fully subscribe to it. It suffices to go and meet with and listen to the Goldman guys at Marcus, and how they were and are able to create that startup feeling at this new operation, and now making a killing as they are up and running. I distinctly remember that it was the same guys who said they would fail big time etc., but so far, good luck with that. Also, and more importantly, wait until we hit the next crisis (around the corner, mind you), and things go pear shaped in a big way. You’ll see them all fall as domino’s, and happily running back to all these banks that will, once again, be all too happy to take them all back in. History never repeats itself, it rimes. I, for one, am getting ready for some fine poetry soon.

Engineering Differently: The Attraction of Startups

Why traditional financial service firms are having difficulty competing with technology startups for talent Figuring out how best to approach fintech has many traditional financial institutions scratching their heads. According to a report earlier this year, almost 60 percent of them are developing fintech capabilities in house.

You kiddin’ me? This will not end well - we all know it, we just don’t want to face the facts. Time to get ready for the trade of a lifetime, looking to leave Paulson in the dust!

Catastrophe in the making - that much is certain. As an investor, with less than 5% (fully taxable) average yield, how on earth would anyone like to have exposure to this, an unsecured consumer, at a time where the yield curve is turning negative (soon), and we’re heading for a slowdown at best, recession at worst? I don’t get it. Defaults and charge offs have only one way to go, so look for more pain across the industry. Alea iacta est.

Who is James?

James is a solution for credit risk modeling based on machine learning algorithms and techniques. Beyond guaranteeing high performing predictive models, James’s interface was inspired in the risk professionals’ workflow in order to make machine learning easily accessible. Under the value proposition of facilitating the increase of credit volume, default rate reduction, and cuts on operational costs, James has been through over a dozen proofs of concept with financial institutions that varied from lending marketplaces to banks with over a trillion of AUM’s. The results of these experiments exceeded the expectations by improving model quality by up to 28%. This has led to the deployment of James’s models in European and North American financial institutions.