Moderator: Gianluca Savelli, NPL Markets, Co-Founder and CEO

Panel group:
Olga Miloserdova, Digital Innovation Lead, Private Equity at Amazon Web Services;
Paolo Sironi, Global Research Leader, Financial Markets at IBM Institute for Business Value;
Paul Wilden, Global Head of Capital Markets at Apex Group;
Burkhard Heppe, Co-Founder and Chief Technology Officer at NPL Markets.

The first set of questions were selected around the topic of digital innovation and its relevance for corporate strategy. It was agreed by the speakers that the approach towards innovation within companies has changed significantly over the last years. Paul Wilden referred to the start of his career, where he drew upon past experiences to express his view that looks like people were more confused with regards to innovation and the implementation of digital transformation in comparison to the present, where he says companies have “very much embraced the idea of innovation also to mitigate the risk of being left behind”. The Covid-19 pandemic was also used as an example of how new digital products were used in their respective companies to run their operations more effectively. Olga Miloserdova highlighted the importance of innovation when it comes to increasing a firm’s value. She mentions that about 60% of a company’s value will come from growth based on innovation more than just cost optimization and backed it up with relevant research. Burkhard Heppe then talked about NPL Markets and how the Platform is helping large institutions to embrace digital transformation. Despite the difficulty associated with automating processes within the performing and non-performing loan industry, NPL Markets provides a software solution to analyse, value and trade bank loans, supporting its clients in digitalising complex processes. Burkhard also mentioned that “it has been easier to onboard clients after the Covid-19 pandemic, as they have become more familiar with digital onboarding processes with an acceleration in the adoption of new technologies”. Paolo Sironi spoke about upcoming trends within the fintech world, stating that “2020-2021 are the years of the digital assets and centralised finance” and went deep into the origins of fintech innovation. He described how fintech innovation has recently moved from being just B2C into B2B affecting the global financial landscape with “two major trends: the bundling of different solutions into a single prospective and the rise of the platforms with business not anymore arranged in a linear way”.

The next set of questions were about new relationships between advisor and clients, and how technology and data can help deliver a better service. Paul Wilden argued that both “technology and human interaction are key to build and maintain strong and long term relationships with clients”. He describes relationships with clients as “a relationship built on trust and over time, but also overlaid by the credibility of the technology systems that we use to deliver efficiency and improve deliverables”. Olga Miloserdova further touched upon the importance of the implementation of digital technologies by describing the way AWS uses data to improve user engagement and business results for clients. She mentioned how AWS has their customers at the center of all their operations, and therefore a need for a consistent data flow that allows them to predict trends and anticipate clients’ needs. Olga also suggested that data should not be numerical only, as numbers don’t give the full picture of what their customer needs. This is what she referred to as working backward from the client and not just when Amazon builds products and services but also when it applies new technology. Amazon uses qualitative pieces of information called anecdotes to back up their numerical data sets. As a result of anticipating customer needs and helping them achieve their goals in a timely and efficient manner, customers will be satisfied, leading to confidence and trust in AWS. Similar to Olga, Burkhard Heppe explained the importance of data within NPL Markets’ operations and valuation services. However, he also highlighted the significance of having an expert team to provide and interact with clients. The complex environment surrounding the non-performing loan market implies that hard numerical facts are not enough to make adequate business decisions, and therefore expert knowledge such as the one provided by NPL Markets is key when analysing the “soft facts” and improving client decisions. In addition, during this set of questions, Paolo Sironi was asked to touch upon the advice he is giving to company CEOs on digital transformation and leadership. He put a special emphasis on transparency, stating that “specially in the financial services industry and in the regulations that surround it, the only way in which new technologies including AI can scale up and give valuable solutions is by being transparent in the way the business is run and built, this must be on CEO’s responsibilities”. Data were also discussed in the context of new trends and opportunities also related to environmental, social and governance factors that continue to gain traction across public and private markets, “this is the direction of travel” Paul Wilden stated “in the last 18-24 months it has become a key element for all the institutions in terms of sharing their ESG priorities internally and with their debt and equity investors”.

Further discussions were also on how technology develops within the financial sector and how it is connected to data in private credit markets. Paolo Sironi described the financial sector as an offer driven industry, “most of the margins that matters in the financial sector operate in an offer driven ecosystem where clients – at least in B2C model – operate inside an opportunity”. Paolo Sironi offered a deeper analysis distinguishing “how in payment and credit business we have mainly demand-driven innovation while in investment and insurance business we have mainly offer-driven innovation for the higher complexity of the value proposition they are offering”. According to Paolo “a true understanding of the push and pull mechanism of the business is super important to make sure the fintech innovation can generate more value in the future”. Burkhard Heppe analysed valuation, portfolio reporting and due diligence in private credit markets; he highlighted how valuation requires suitable market data and historical data to calibrate the model predicting future cash flows. He mentioned some of the challenges and solutions and on reporting he said “reporting requires regular data extracts, where the challenge is less in the ongoing reporting tasks which are highly automated, but more in the required adjustment to the data infrastructure so that the right information can be extracted”. Finally he mentioned how due diligence is the part of the business that is the least automated and existing solutions fall short for our clients needs which is why we decided to develop such solutions ourselves.

Documentation management and enriching structured databases with information from unstructured documents is a genuine problem encountered by many and also in the business where loan data are not natively digital but transferred to the servicer and investor via transfer the transfer of unstructured documents (contracts, borrower and court communications, valuation reports, financial statements).

NPLM supports the due diligence process by providing a virtual data room. Existing VDR technology is secure and reasonably easy to use to share documents securely and facilitate controlled user access and user communication through Q&A functions.

The final part of the webinar was about analysing real cases of digital transformation and new paradigms of cooperation between large companies and fintech institutions. Olga Miloserdova discussed how AWS supports digital transformation. It is not just about tools that may not give the right results but it is more a real cultural shift and the cultural change that needs to happen, across the company from the top management and middle management people. Sharing experience is important, not just about what your competition is doing but also a broader business environment. She discussed how technology such as the immagine recognition are relevant across a broad range of applications and sectors from legal, finance to healthcare and industrial.

The final part of our conversation was about the fintech sector and future paradigms of cooperation between large companies and fintech institutions. Paul Wilden used his experience working with fintech companies to shed light on how fintech entrepreneurs should aim to deal with large companies, he underscored the importance of fintech in building credibility in fact “large companies filter the good from the bad start-ups, usually through due diligence of course, but also looking at company credibility which is primarily gained through “existing connections and partnerships with other larger companies”. Olga referenced a new trend of increasing cooperation between large institutions and start-ups, in financial services sylos worked for centuries but “at this pace where everything becomes more democratised there is a push to open the system and technology is the underlying layer for doing that.”

It was commented amongst all speakers that financial institutions and markets are currently under an array of regulations, which come with both headwinds and tailwinds for fintech startups and companies. Burkhard Heppe talked about different issues that NPL Markets encountered as a company when trying to onboard large companies into the platform. Given the high amount of regulation they are under the pressure of, large companies and their representatives tend to “ask loads of questions” and are a bit skeptical when deciding to partner with fintech companies. However, regulation has also opened other opportunities, for example NPL Markets is supporting many large banks and investors in many areas such as regulatory reporting, which large players are happy to outsource.

At the conclusion of the webinar Paolo Sironi provided his view on the differences of how ecosystems and platform businesses operate across financial sectors and “how a very powerful digital transformation can be implemented when a company starts operating both as ecosystem and platform”. Paolo Sironi also referenced few winning exemples both in Europe and Asia and concluded his analysis stating that “I see the most value to be generated in the digital transformation when fintech, regtech and banks understand that there is a value of thinking ecosystems, putting a platform on top of this ecosystem to bring order and frictionless capabilities in the various interaction among the users and therefore creating new business model that we have not seen before because user are now connected digitally”.