6 Start-ups Defining the Future of Finance
FinTech Innovation Lab is a bootcamp of sorts that seeks to foster promising financial technology startups in New York City, and this year's crop of six winners are promising a gamut that runs from CIA-inspired security and role-playing-game-like training programs.
The lab was started last year as a way to compete with financial technology growth happening in Silicon Valley and bring a new breed of innovation to the nation's financial nexis. The new class of six companies was on show at Credit Suisse this week and they're an impressive crowd: It's clear these start-ups are aiming to create a future that's all about gamifying typically dry financial data and making big data programs have Sherlock-like deduction powers. Big New York banks and venture firms are eager to put them into action.
"You have obviously tremendous domain expertise in New York in financial services," said Maria Gotsch, president and CEO of the New York City Investment Fund, which, along with Accenture, co-organizes the program and its demo day event that occurred Wednesday. "The sector that is going through some restructuring right now. Any time there is restructuring there is time for new ideas."
The program aims not only create jobs and turn New York into a leading innovation center, but also to usher in a new era of security and technology in the nation's financial hub. Instead of waiting for tech entrepreneurs to bootstrap themselves into relevancy, the banks are using FinTech Lab to cherry pick the most promising ideas and turn them into functioning companies, faster.
"What we're hoping with the lab is that it attracts more money and talent in that sector," Gotsch says.
The companies get mentored by the big banks and access to high-level executives, creating one of the most well-qualified sounding boards around. The banks get the chance to become stock owners in the companies too: each winner can opt to receive $25,000 in equity financing from FinTech Lab.
This year's crop of graduates includes:
BillGuard operates as a virus checker for financial transactions, or a spam blocker for overcharges and fraud. It's a free service for consumers to use. One enters bank account information, and the system scans your transactions against a database of red flags, much like a spam checker, either from known issues or scams other users have reported.
BillGuard also makes disputing a fee a one-step process; it handles the direct connection to merchants to resolve the issue. BillGuard makes money by settling disputes with merchants and saving them the chargeback fees from banks, usually with a 70% to 80% response rate from merchants.
The next phase is to integrate BillGuard into online banking software so that when you, say, log into your Bank of America account and notice an odd charge, you can dispute it with one click. FinTech lab helped push the company into that direction, Yaron Samid, CEO of BillGuard, said.
"They basically took us through puberty in three months," he said.
Big data is going to be big this year, and EidoSearch's goal is to make it all easier to digest. Similar to how Pandora dissects a musician you like by 100 different qualities to determine what other music you would enjoy, EidoSearch lets financial professionals generate new trade ideas and find relationships spontaneously by using data as a search query.
"We're going after mutual funds, hedge funds, and investment banks," EidoSearch president David Kedmey said. "The simplicity of this interaction, it belies the complexity of what's going on."
EidoSearch uses a big historical tracker that allows users to quickly search variables and discover relationships, such as a stock price and volume. FinTech has helped the company decide in which sectors to focus its energies. The lab has been a "huge accelerant," Kedmey said.
The True Office app could become a saving grace for anyone who is sick of being stuck in arduous compliance training sessions.
It takes what is usually a drab corporate training and turns it into a fun, iPad-based game, complete with challenges, hidden surprises, and multiple goals to encourage replay.
"We gamify mandatory compliance training," said Tim Smith, the company's chief technology officer. "This is a very large--and deeply unsexy--market."
The interface turns what would normally be an hour of boring document reading into a 15-minute game that involves walking around a virtual office, talking to coworkers, and deciding whether to report computers or phones containing company information that were left out. The game can be customized for each company and incorporate individual compliance guidelines, which players can check throughout play.
Digital Reasoning is another company supporting the idea that "big data" is a ballooning industry. The company describes its goal as creating "automated understanding," which means software that can read and understand text as humans do.
CEO Tim Estes said the company sees a coming "understanding gap" between human attention spans and the amount of data available, which is increasing at a rapid rate. This would, for example, make emails searchable based on the facts and relationships in them, replicating the human reasoning process.
"It will make useable data that's unstructured now that is available only currently if humans are in the loop," Estes said.
Visible Market is stock-market monitoring software for people wanting a look beyond the usual flow charts and bar graphs. The app for iPad, StockTouch puts financial data into colorful visual graphs that let you track not only the current market but historical data and trends. It's a "game-quality user experience that can be taken everywhere," CEO Jennifer Johnson said.
The company's app uses a game engine that it says is a merging of art and science. After FinTech Lab, the goal is to build a company that provides visual mobile apps to financial institutions for asset management, portfolio performance, and other number-tracking needs.
Centrifuge likes to call itself a digital Sherlock Holmes--that is, a way to solve "mysteries" of fraud and data using intense analytic tools. It works through pattern-based visual discovery in big chunks of data. That includes link analysis, social network analysis, interactive visualization, and collaborative discovery.
The company has its roots in national security--one of its advisers is a former COO of the CIA. One of Centrifuge's uses is to analyze retail shoplifting patterns to find organized crime networks.
"We've been thrilled to be in New York because this is where the data is," Centrifuge CEO Renee Lorton said. "We have a disruptively lightweight, inexpensive technology. We are ready to ramp in the New York market."
TIM DONNELLY | Columnist | Inc.com Contributor
Tim Donnelly is a freelance writer and managing editor of Brokelyn.com. His work has appeared in Billboard, The Atlantic, Thought Catalog, and The New York Post.