As the days go by, during these unprecedented times, we noticed that the conversations surrounding normalcy, industry adaptation and predictions of the future gradually change. We are happy to continue our digital travels around the world through our webinars in the hopes of keeping the discussion alive about how we can help each other weather the changes and navigate digital transformation. Our second stop was the United States. We invited Giuseppe Mazzeo, CIO at the Holdun Family Office and Danielle Ferry, Innovation Strategist at Moody’s Analytics.
Danielle has over 15 years experience in numerous major U.S. firms, including T12 Capital Management, AIG, Morgan Stanley, Bear-Stearns and her current role at Moody’s Analytics. She engages with close to 100 fintechs per year. Danielle looks to implement about five POCs per year. Moody’s Analytics is a corporate innovation unit that aims at identifying and building new revenue opportunities for the company. Moody’s has an accelerated, proactive element cycle that is usually achieved by partnering with startups. Danielle will help us cover the Corporate-FinTech relationship perspective.
The Chief Investments Officer at Holdun Family Office in Miami. The Holt Accelerator is backed by the Holdun Family Office, a merger of the Holt Dunn Group. Giuseppe himself has over 20 years of experience in Chief Investment positions working for many banks, like Swiss Asset Advisors and Credit Suisse to name a few. Pepe brings great insight into market indicators and the private investor perspective.
The current global situation has been an eye-opener for a lot of investors.
Holdun is a family office, a branch of the Holdun family based in Miami and specialize in jurisdictional diversification. With 80 percent focused on investment accounts and 20 percent on trading, this year a shift in trend occurred as an increase in demand for outside investment opportunities was observed. An interest in Artificial Intelligence, Blockchain and Cryptocurrency is an indication of where the next generation of old money is headed to ensure the growth and protection of their family legacy during these changing times. The transition into COVID-19 slowed down investment and shifted towards trading as clients worked on a strategy geared towards asset protection.
It’s important to keep going and focus on the strategy. Once the data shows encouraging signs of return to normalcy, we will see investment activities outside the traditional asset classes increase.
With central banks flooding the markets with liquidity, interest rates near or at zero (some are even negative in Europe) & fiscal stimulus posing headwinds for government deficits, Giuseppe believes that the investment strategies are moving away from bonds and towards more volatile equities as the new generation of investors actively search for lucrative opportunities.
To pivot or not to pivot?
Using the current climate to capitalize on your FinTech’s capabilities to help solve COVID-19-related issues can be a great solution to ride the wave. Not only is this an opportunity for creating lasting value to new customers and growing your business, but it is also a time where we will see an acceleration in acceptance of technology that banks previously hesitated to adopt.
Some examples seen by Danielle:
FinTechs helping banks with compliance.
Banks’ offshore teams have been shut down and can no longer work as they find themselves in locations where they lack the resources to work remotely (i.e wireless internet) creating a substantial decrease in their workforce.
By repackaging AI machine learning tools, the startup was able to offer a system that would help with alert investigations without requiring as many people.
FinTechs helping hospitals avoid fraudulent suppliers.
Hospitals are being submerged with calls and emails from unknown suppliers claiming they can provide masks and gowns. Unfortunately, they don’t have an efficient process in place to vet these new suppliers and detect the fraudsters from the legitimate offers.
Fortunately, Moody Analytics is supporting a startup with the capabilities to use their current knowledge and pivot towards a solution to provide these hospitals with tools to avoid fraudulent suppliers and concentrate on what really matters. Although, these products might be offered for free, this opportunity allows for the startup to further improve their tools and build out new ones that can be offered to others facing similar issues in other industries.
Opportunities for Fintech Adoption: The Emerging Key Verticals.
COVID-19 is highlighting the importance of understanding who is in the multiple tiers of your supply chain. Companies need to have more transparency in order to understand who they are doing business but also who their suppliers’ suppliers are. This visibility will allow business to understand risks that might have been, otherwise, overlooked.
Are employees really productive when working from home? Employers’ doubts have been put to rest as the global crisis caused by the Coronavirus forced the world into remote-work. With remote-work becoming the “new normal”, companies will now have a lot more flexibility.
Do I really need as much office space?
Do I have to limit hiring within my geographical area?
The small business lending bridge loans offered by the federal government is showcasing how important and challenging it is to do KYC/AML. Many of the large banks made it very clear that they don’t intend to extend any loans to small businesses that they don’t know because onboarding from a AML KYC perspective is so onerous. The volume is too big to handle.
With distractions at an all-time high, fraudsters are taking advantage of businesses and people. These frauds are about anything and everything in relation to COVID-19, whether we are talking about supplies or testing centers, it is becoming evident that cybersecurity is necessary as the world is going digital.
Regulation in Cryptocurrency
Cryptocurrency is becoming a very attractive asset class for diversification. In portfolio management, there are a lot of requirements for investments. Therefore, having regulation around the asset will allow a lot of clients that would previously avoid Cryptocurrency to invest without hesitation due to its ease of access amongst other things.
Robo Advisors & Artificial Intelligence
There is still a lot of misconception surrounding Artificial Intelligence. When it comes to robots creating your portfolio of investments, older generations are reticent with the use of Robo Advisors while newer generations enjoy the ease and convenience of pressing a button to select investment options. Will Giuseppe be put out of business? Giuseppe believes that it is important that as we see A.I. being more prominent in various industries, people need to be educated and truly understand the various implications and opportunities it brings beyond convenience.
Return to Normalcy: A Financial Black Swan.
Pepe believes that this situation will return to normalcy in Q2 2021 in the best case scenario. Although, “normal” will not be achieved as quickly as people think. As we move out of being quarantined and having curfews, our “new normal” has yet to be seen. We can use the 2008 crisis as an example of potential human behaviour (i.e increase in savings) but the reality is that the events are not comparable.
Lessons will be learned, behaviours will change but it won’t be as simple as turning a switch “on”.
Fintech Adoption: Are Financial Institutions Ready?
Quarantine has hindered an important aspect of sales: in-person meetings with customers. As a result, Danielle notes that people are focusing a lot on costs and getting scrutinized on expenses. So how does one sell to a customer that showcases signs of resistance? Demonstrate your solution in ways that show cost savings and increase in efficiency.
The messaging needs to be just right. Customers are going through rough times and revenues have decreased. Therefore, costs are the only thing that can be controlled.
Areas to focus on: Tips for startups during COVID-19.
Working at a corporate innovation unit, Danielle values the importance of team building during these difficult times. Everyone is working remotely. Consequently, activities such as chatting in the break room, going out for drinks or even reading body language to understand a colleague’s well-being have been removed from the equation.
Startups, unlike corporations, have a culture that draws in employees and creates motivation around it, so it is important to think about how to maintain that uniqueness within the team during quarantine. It is essential to remind ourselves what the culture is and how to translate it digitally.
Cash flow management is another key area to keep in mind according to Giuseppe.
An example that was seen before is the issuance of bond type of securities or notes. These can be bought based on contractual agreements. It’s important to note that these are not securities that you can trade. However, they are bought for financing projects and Pepe sees an increase in popularity for this type of transaction.