Swissquote Conference 2017 on FinTech

© 2017 EPFL

© 2017 EPFL

The eighth annual Swissquote Conference on FinTech took place at EPFL on 3 November 2017. Financial technology (FinTech) has transformed the financial services industry over the past decade and the technological changes are ongoing. This unprecedented interplay between finance and technology offers great potential for developing new financial services business models and products. The Swissquote Conference featured latest research and insights on FinTech provided by leading experts and scholars in the field.

This conference included a mix of presentations, covering finance, data science, and computer science, and a panel discussion by FinTech entrepreneurs. Five invited FinTech startups showcased their products and services.Michael Ploog, CFO of Swissquote, in his welcome address highlighted the importance of technology and trust for the banking industry. Bruno Biais from the Toulouse School of Economics presented his paper on a game theoretic approach to bitcoin, where the underlying blockchain is modeled as a stochastic game. He analyzed the equilibrium strategies of rational, strategic miners. He showed that mining the longest chain is a Markov perfect equilibrium, without forking on the equilibrium path, in line with the seminal vision of the bitcoin-founder Nakamoto (2008). But he also clarified that the blockchain game is a coordination game, which opens the scope for multiple equilibria, which correspond to the forks of the blockchain observed in practice. Lisa Goldberg from the University of California Berkeley, discussed the covariance estimation error that has plagued quantitative finance since Markowitz launched modern portfolio theory in 1952. She characterized a source of bias in the sample eigenvectors of financial covariance matrices, which distorts the weights of the minimum variance portfolios and leads to risk forecasts that are severely biased downward. She presented an effective sample bias correction that she has developed in one of her current projects. Adrien Treccani, CEO of Geneva based Metaco, provided a technical introduction to distributed ledger technology, blockchains, and cryptocurrencies. He also discussed their potential applications in finance. Joseph Bonneau from the Electronic Frontier Foundation elaborated on the promise and peril of smart contracts. Smart contracts have the possibility to replace traditional contracts, mediated by lawyers and courts, with efficient, automated digital agreements. He gave an overview of what smart contracts are and how they work, using the Ethereum network as a working example, and discussed some of the open problems and limitations of smart contracts. Alexander Lipton, MIT Connection Science Fellow and visiting professor at EPFL, presented an exhaustive view on the digital transformation in banking. He outlined several steps, which banking industry has to undertake to benefit and prosper from digitization. Jeffrey Bohn, Head of the Swiss Re Institute, presented the themes and challenges related to how technology is impacting insurance. As technology continues to insinuate itself into all facets of financial services, disruption in the insurance industry – InsurTech – is inevitable but continues slowly.

Five invited FinTech startups (EdgeLab, Smex, Stripyourbanker, Wealth Initiative, Wecan Fund) showcased their products and services during the coffee and lunch breaks at the booths located in front of the auditorium.

A panel discussion, featuring Jeffrey Bohn, Sam Guilaume (Co-founder of TwinPeek), Michel Iskander (CEO of Dynamic Assets & Performance Monitoring SA), and Sal Matteis (CEO of Fintech Fusion), addressed the FinTech opportunities and challenges. The discussion helped to disentangle hype and real impact of new information and data technology on the financial services industry. The main conclusions included that finance and technology will converge. Surprisingly, lighter regulation was not considered a key advantage for FinTech innovation – a stable regulatory framework is more important and will incentivize the right directions for FinTech. Cultural differences relating to technology and data privacy across the jurisdiction will prevail and have to be taken into account for a global approach. EPFL could best support the FinTech industry by reinforcing the education of students in areas related to FinTech, as well as by providing the grounds for pre-competitive research in FinTech partnering with the companies.

The conference attracted 160 participants, 40% of which came from the financial industry. It has been jointly organized by the Swissquote Chair in Quantitative Finance, the Decentralized and Distributed Systems Lab from the School of Computer and Communication Sciences, and the Swiss Finance Institute at EPFL. Sponsoring by Swissquote and the Swiss Finance Institute is gratefully acknowledged.