TSL TRENDING STORY
The Secured Lender’s senior editor sat down with three technology executives in the FinTech space: Jim Miller, co-founder and CTO of InterNex Capital, Hrishi Dixit, CTO of YieldStreet and Spencer Robinson, head of strategy at Kabbage, to hear their thoughts on the latest trends and practices.
By Eileen Wubbe
Tell us a little about your background.
JIM MILLER: I’ve been in FinTech for almost 20 years now, before people called it FinTech. My background before InterNex Capital was mostly in trading. I’ve been a technologist all of my career. I was a developer and then moved to New York to join a startup called CreditEx, which was building the first online trading platform for Credit Default Swaps.
InterNex is my fourth or fifth startup and we are focused on leveraging technology to revolutionize small business lending. In all cases I joined startups at the very earliest stage when it was just starting to build. It was a concept on paper and we had to build out the business and the technology. InterNex is my first foray into the lending side of the world.
DIXIT: I’ve lived in the internet startup world for almost 20 years now, eight of them in San Francisco (starting with the dot-com boom in late 90s) and the last 12 in New York City. Over this time I have served in several tech-centric roles, from software engineer to CTO, across a variety of domains, but primarily focused on financial systems.
I currently serve as the Chief Technology Officer for YieldStreet, where I served as a formal advisor since their inception before coming on board as CTO. Prior to this, I was the founding CTO of LearnVest– a New York-based financial planning startup acquired by Northwestern Mutual in 2015 for over $250mm.
I was also the co-founder of Gordian Labs, a boutique software development and consulting firm that specialized in financial systems and internet startups, where many successful startups like LearnVest and Twilio were “tech-incubated”. Today, in addition to my full-time role, I continue to serve as an advisor and angel investor for several startups, particularly in FinTech and digital health.
ROBINSON: I have 15 years of product development experience to support small-business growth. I was quickly attracted to the head of strategy role at Kabbage, which marries my technological strengths with a belief in Kabbage's mission of providing entrepreneurs with much-needed capital. I’ve been with Kabbage a little over seven years now. A couple of guys and I built out the first version of what is now the Kabbage platform. We built out our technology teams, our analytics teams, data science teams and risk teams. Now I run strategy for the company, which is much broader.
Before Kabbage, I was a consultant for a couple of boutique consulting firms. I spent much of my consulting career working with Bear Stearns and then JPMorgan, building internal software systems for their equity trading teams.
Which area of technology excites you the most?
MILLER: I’m a developer at heart; I like building platforms and services that are business differentiators or, basically, taking an idea and building the technology that makes us unique and different. At InterNex, we’re really proud of our client portal because it creates a very powerful user experience in terms of customers managing their account with us. Every time we show it to our new clients, our prospective clients or investors, they really get excited about it. That’s where technology can make the business more viable and effective. Being creative and innovative in those ways is really how a FinTech company is going to distinguish itself from its competitors, especially large financial institutions.
DIXIT: There are several, and new things come up all the time to the point that it gets tricky to keep track. I particularly enjoy finding applications of new technologies to different areas and verticals, particularly FinTech and digital health. On that front, currently there is some pretty exciting stuff happening with decentralized ledgers (blockchain), predictive analytics and deep learning.
ROBINSON: Artificial intelligence is what has my attention these days. I spend a lot of time on data science and modeling, but I think if we look at the way technology has evolved, particularly in the machine learning and data science area over the last two-to-five years, it’s the velocity and acceleration of innovation that is really getting us to a very interesting point. That’s both in terms of the capabilities and possibilities of what we’re going to be able to do with algorithmic machine learning and moving into a truly artificial intelligence world. I think it’s fascinating.
I think there are particular applications that can and probably will take off quickly and those applications are going to be more geared towards automating a meaningful conversation with the customer. Truly automated 24/7/365 customer support, from simple chat to answering frequently asked questions, is going to change a lot of the ways customers interact with institutions, especially when it relates to financial products.
When it comes to risk modeling, we’re a long way away from being able to use true AI in a credit-decisioning world. It’s a highly regulated world and is therefore something we’re going to have to understand a whole lot better before we let loose the computer to learn and do it on its own.
A lot of what we do in the credit risk world is go back and understand why a decision is being made and make sure that why is okay. There’s a big difference between a binary answer and an answer where we say, “The answer is yes, and we understand why it’s yes,” and visa versa. Reaching true AI will take time, but we’re already learning a great deal with algorithmic-static machine learning and those learnings will lead to a more unsupervised machine in the future.
What are some of the trends you’re seeing?
MILLER: Some of the big things are obviously big data. The other thing that goes very much hand-in-hand with big data is machine learning. That’s an area that’s really touching a lot of businesses and areas. Every technology firm, be it in finance or anywhere else, needs to be aware of big data and then how to apply machine learning to that.
In our world it’s more about using data to be able to predict ‘Will this be a good client? Is this still a good client? How are they performing in their business or in their loan with us?’ I think those are trends that are very dominant in the space right now.
Another one that I’m very interested in, is how several vendors are building on what I would call an ecosystem. Salesforce is a good example of that. Salesforce started specifically as a CRM tool, but as they’ve gotten greater acceptance, they have their apps exchange and community approach, which basically allows clients to manage not just their interaction on a CRM level, but at their account level, all the way down to the bank account.
DIXIT: The biggest thing we've seen in recent years is the upstaging of older, more traditional financial industries like mortgage, insurance and lending, by new tech-forward startups. Technology is simultaneously enabling awareness, access and ease of use across a wide swath of these, many of which are stuck in decades-old ways of thinking, much to the detriment and confusion of end consumers and it is only the beginning. The other trend, one that is most relevant to us, is the democratization of investment opportunities in the wake of the JOBS act, making wealth management and alternative growth options previously accessible only to large institutions and funds available to a broader investor population.
ROBINSON: If you look at FinTech over the past few years, the focus has been on the niche, financial side instead of the technology solving a unique challenge. That’s changing. We’re really seeing the industry take a renewed interest in the tech side of FinTech, and I’m happy to see that. It’s starting to shift back towards techfin instead of FinTech, with a heavier focus on the technology, which is good for the market and good for the customers.
How do you make technology a part of a FinTech business?
MILLER: I think smart FinTech companies focus on what differentiates them, and then leverages services from everybody else that they can find. So, for example, as a lender, we have a lot of documents that we store and early on we knew we’d need to find a service to do that.
We use Box.com but there’s plenty of other ones, I think Box has the best services for enterprise businesses. But all these vendors realized that to be successful they needed strong, tight integrations, so they’ve built out APIs, QuickBooks, all the accounting packages, B&B for getting credit data, banking. I think that’s got to be an integral part of the strategy of any FinTech company. But the great thing is vendors understand that, and they’re embracing it and pushing aggressively to that.
DIXIT: The underpinnings of finance have always been on an algorithmic and scientific substrate, so finance and technology are the most natural marriage in general. Technology streamlines almost all aspects of finance - an expansive and democratizing outreach through the internet, improvement of operational efficiencies through increasing automation, and perhaps most importantly using machine learning, natural language processing and distributed computing to analyze massive data corpuses and enable better decision making -- all of which are at the core of what we do at YieldStreet and many other startups in this space.
ROBINSON: In many ways it’s easier than some other industries in that the financial world is very data-driven. This isn’t a new thing for the financial world. They’re used to sitting down with people and working through some type of analysis. In many cases, FinTech takes that process farther forward, more quickly and with more precise analytics.
Integrating technology into any business starts with understanding the business problems. Technology itself isn’t the answer. Hire one or two developers, give them context to the business problems, and you’ll end up with terrific solutions to what now look like simple problems. Technology shouldn’t be a cost center, but rather a producer for the business.
What do you think is on the horizon in technology or in FinTech?
MILLER: Everybody is very enamored with blockchain right now. I think it has value. I think it’s over hyped right now, and it will settle down to reality. Big data and machine learning are big in FinTech, and I think in our space, specifically, that’s going to lead to a lot more automated and/or predictive underwriting and portfolio management.
I think the ability for lenders to get credit information and detailed financial information about someone who is looking to borrow money from them and being able to use a lot of historical data and trend data to say this is a good credit risk or bad credit risk with way less human touch needed is on the way.
DIXIT: One thing everyone is talking about and, in fact, taking call options on, is the use of blockchain across many areas in FinTech and other domains. Among other things, the intrinsic security posture of distributed, decentralized ledgers makes it a very interesting piece of technology to apply to a regulated space like FinTech, amid the ever-growing danger and sophistication of hack attacks.
ROBINSON: Especially in the FinTech world, there will be a continued focus on regulation. For any technology-enabled company, it’s extremely important to stay on top of existing regulations, but know the regulations that are being discussed or anticipate what may come in the future.
We’re seeing evolution in data transparency, money movement, breakdowns of borders and more globalization. I think it’s in those four areas where I’d say I spend more of my time trying to think of how we’re going to make sure that the foundations and the platforms that we’re building are ready and prepared to maximize on those sorts of opportunities as they come out.
What is the best advice you have ever received?
MILLER: Be able to differentiate between what you can control and what you can’t control, and focus on the things that you can control. That’s been hard to follow sometimes, but it’s the best advice I’ve gotten. There are always things that are outside of your control, so if you don’t let them go you will waste time and energy focusing on it.
Always look to improve yourself or better yourself. As a younger person I was a bit arrogant; some readers will probably argue I’m still a bit arrogant, but I used to think, ‘Oh, I know everything, and I read a couple of books and just realized, oh, yeah, maybe you’re not as smart as you think you are.’ The best thing you can do is realize that as good as you are, you can be better. If you focus on improving it will make you happier, but also make you a more effective person overall.
DIXIT: Nothing is so good that it can't be made better, faster and safer. Never be satisfied. Keep being critical, keep questioning, keep improving.
ROBINSON: I think trying to build perfection is the enemy of progress. Put simply: you have got to move forward. If you focus on perfect, you’ll never take a chance and you’ll never move. The second piece of advice, which comes very specifically from my developer days in my past, is to never develop a technology feature to account for an error in your technology. Don’t accept the fact that you’ve got problems or errors in your system. Don’t build patches around problems; address the problem head on.
What is a typical day like for you?
MILLER: I think it somewhat depends on the stage of the business you’re in. Just looking at InterNex, we spent about a year building up a platform before we ever went live. So, my typical week then was focused on building functionality for our MVP or pilot version. It was really about what are the features we needed, defining them, building out the requirements, getting the code built and testing it. It was a lot about how we get the platform up and running and developed.
Once we’re live and you’re in an operational sense, the typical CTO’s day, I assume, changes. Their first and foremost priority is checking that the system running as expected. You’re checking your monitoring tools and looking at that kind of data. Hopefully you’ve built it out so you’re only getting alerts for problems so if you’re not getting an issue, you can assume everything is going well. But it’s a focus on the operational and the customer and their experience and making sure it’s outstanding. The rest of your time is looking at how to improve and how to get better.
One of the things that’s great about technology is no matter what you build, you always can make it better. So, whatever you’ve built, there are new features you can build on and ways to make it more efficient. I typically focus on the things that we can do to align the technology to the business needs and to advance where it can make us more effective at what we’re doing.
One of my current focuses after we have the core platform is improve our integrations, and add integrations to other systems that we use to make what we do more efficient.
DIXIT: It changes with the size and scale of the company. I have always enjoyed being part of early-stage companies, and the CTO role there is very different than that in a bigger company, which is part of what I like about it. It’s part programmer, part ops person, part IT person, part tech evangelist -- and in general "the techie in the company". A typical day at YieldStreet, for instance, would be a mix of "build and release this", followed by "interview her for this role", followed by a leadership meeting planning out the next week/month/quarter, followed by lunch. Rinse and repeat.
ROBINSON: A big piece of what I do is make the underlying philosophy of Kabbage a reality: deliver a delightful user experience from start to finish. We have a lot of opportunity, we make a lot of moves and we do things very quickly. We spend just as much time making sure that we’re working on the right next thing as we do our existing technology. We make sure we take a view of the entire landscape rather than getting too narrowly focused into on problem.
When you’re not doing CTO or strategy duties, where can you be found? What do you spend time on outside of work?
MILLER: I’m an avid baker, and love to make creative, healthy dishes. I keep threatening to quit my real job and go open a dessert shop. One of my favorite new creations is margarita banana bread. I love margaritas and I love banana bread. My wife suggested to merge those two together. I basically make banana bread and then do this margarita syrup that I pour on top of the bread, so it makes a very interesting taste. I got to create a different flavor, so that’s what I like about baking. It allows me to show my creative side.
DIXIT: Early-stage startups don't leave a TON of time outside of work, but when that does happen, I will most likely be traveling somewhere. Or sampling a new single malt scotch somewhere. Ideally both.
ROBINSON: Well, I’m a father of three young children of eight, five, and two. Given those ages, I’m firmly entrenched in young kids’ soccer leagues and basketball leagues and shuttling around from weekend games and practices and things like that. It sounds trite, but the minute I get out of here I try to spend as much time being dad as I can.