Jul 17, 2017

Using Big Data in Fintech

Going off the hype momentum, we see many different players emerge in the fintech space. In this video blog, James Jockle, Chief Marketing Officer at Numerix sits down with Paul Rowady, Director of Research at Alphacution to project what will lead the hype cycle for 2018 and how predictive data is playing a key role in the hype cycle.

Video Transcript:

Jim Jockle (Host): One of the trends that are early days which play off the momentum that we’ve continued to see of big data, predictive analytics, machine learning, is now the concepts of alternative data sources and plugging different information outside of market data. And most notably we’re on the early days of the internet of things and with the advent of 5g this is where we’re really going to start seeing things talking to each other.

Paul Rowady (Guest): This may be next year’s hype cycle, poster-child term. You can see it’s sort of bubbling now. I mean it’s the core topic of an event I’m doing later today. What’s interesting and you could argue that this has happened with the other marketing terms, marketing darlings of prior years, is that all of a sudden more traditional sources of data that maybe have not enjoyed the golden age of attention or it’s been a while since they’ve been in the limelight are recasting themselves and rebranding themselves as alternative sources of data. To the point where anything that’s not market data, that’s not price or volume related or some analytic derived off of those, off of that raw data source, are all of a sudden alternative data news and sentiment and corporate actions and earnings might fall in this bucket when of course decades and decades of experience in dealing with those particular factors and those particular data sources. So, you have a little bit of a feeling of well this is just warmed over, this is the leftovers from a prior age combined with some genuinely new and interesting fascinating sources of data. Satellite data for agricultural products or for retail or certainly the internet of things now that you have devices in your home, thermostats and appliances that are publishing data to some core AI that’s doing pattern recognition on the life of a refrigerator, of a toaster. Even the wearables, all the Fitbits and that trend could be used to feed into some new kinds of trading indicators.

Jockle: It’s going to be fascinating in terms of bubble predictions, I think implications for commodities would be pretty clear. I know some commodity traders that have always monitored the whereabouts of post panamax ships in their location and delivery dates and how that would impact or offset against OPEC style news or things of that nature. So, perhaps your IOT business can start up tomorrow.

Rowady: Well, again conceptually this is a very exciting time and there is a ton of new-ness. New data sources, new high performance computing you can certainly contemplate much more complicated problems because the computational firepower is really almost now beyond the use cases that we need them for. At least in our neck of the woods. Now there may be some major defense and governmental and weather and some other kinds of applications that can actually access that kind of computational firepower but I think our industry and the trading component in particular, is really trying to figure out the problems that could even utilize that kind of computational firepower; that’s number one. Number two is, is the market really responding to fundamentals or is it responding to something else like liquidity, and sentiment, and things that are not really….I mean just because I have a satellite photograph of empty parking lots, is that a trading indicator or is that an investment theme. Is the update of that satellite photograph, is that really a tradable piece of data or does it feed into a theme that malls are going to be shutting down and I’m going to position myself over time? So, I often worry about not getting too far bought into the hype and keep the new-ness in perspective. These new pictures and these new data sources and data types are really incremental to what we already have and so you have to I think keep your feet firmly planted on the ground as to how much impact all this is going to have. I think in most cases it’s incremental. Once in a while you get an order of magnitude, breakthrough where something shows up that really changes the framework, but I think most of this is incremental and in a game of inches that may be enough.

Jockle: Well Paul I want to thank you so much and the blog we were talking about today on alphacution.com is the source of the AI hype but I know there’s a lot more out there and I want to thank you so much for breaking down the hype cycle a little bit.

Rowady: Thanks, Jim. Good to be here.

Jockle: And of course, we always want to talk about the topics, you want to talk to us. Follow us on Twitter @nxanalytics or on Linkedin and we’ll talk to you next time. I’m Jim Jockle, thanks for joining.

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