Real time data and fairer pricing for new assets

By Markus Lampinen on Wednesday 17 January 2018

Opinion

Markus Lampinen thinks the tools are in place for building a future of distributed financial services.

Through the inception of the JOBS Act and the emergence of online marketing of securities offerings, a new class of data has emerged on predominantly private offerings. This wave of new data to the public domain started emerging rapidly nearly a decade ago with early stage private capital and private peer to peer loans, and has blanketed several asset classes and geographies since. With all this data, where can we expect to find the use cases and utility in the future?

We can see at least two dimensions that will have a fundamental impact: speed and accuracy.

The Changing Technological Maturity

The business contexts for financial data have evolved rapidly, with updated rules on marketing of securities offerings, but also with new regulation around data protections such as the General Data Protection Regulation (GDPR) and the broad Payments Services Directive 2 (PSD2) in Europe. While the business context has evolved rapidly, so has the technological maturity unlocking and allowing for new use cases.

The cloud was the latest forefront in financial services adoption of technology the past few years and now the next major change due to happen is that of the distributed applications and serverless architectures. By distributing serverside computing further, we can unlock benefits such as higher security and an almost unbounded performance. With less of a shopping window, applications have less of a targeted footprint for cybersecurity concerns, and with a distributed set of asynchronous methods, applications can respond in real time to a large number of requests.

Real Time Applications

With these two forces combining, we end up with far more data than we have ever had, certainly in a financial services context but also more broadly, as well as the potential of processing, reacting and adjusting to that data in real time and in troves at that. This real time applicability of data brings interesting applications to our fingertips, which have yet not been possible. Examples can include real time pricing of private debt, real time monitoring of sanction lists and real time pricing of assets such as private properties based on granular neighborhood data.

Naturally some applications will prove more valuable than others with real time aspects. You can for example imagine having lenders able to price loans based on access to small businesses financial data through accounting apps and bank accounts in real time information updated through APIs. This would lower the cost of capital for the small business, due to the lending process being instantaneous and with more data points than previously.

Fairer Pricing and Valuations

2017 also saw the true inception of ICOs and altcoins. The major drawback and criticism of new cryptocurrency initiatives is often the opaque methods of valuations and lack of fundamental data. But by being able to build ecosystems of new data points around inaccessible asset classes as well as new asset classes, we can build fairer valuations and better investor ecosystems around these. Why is this important? In order for any asset class to fundamentally appeal to a broad investor base, we need the correct mechanisms to be able to not only price assets, but also communicate the fundamentals fairly.

In the domain of private assets and offerings, companies such as FactSet and AltFi Data are pioneering more access to information. This information is on occassion aggregated from publicly available domains, and with the inception of a true API Ecosystem in financial services we can expect this data to become far more granular and even privileged via private access granted by the data owner in question e.g. to their financial accounts.

These shifts are long term, driven by technological developments as well as end user preferences. We want access to capital on our terms, we want to control our data and we want to be given access to information for educated investor decisions. In the future we may get these more directly than ever, through real time APIs. Yet how we use these data points will be far more important than the data itself. The opportunities are already here and we are building a future of distributed financial services. 

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