How could bank decrease their impairment losses and take advantage of Artifical Intelligence, big data and market analysis? We sitted with Evangelos Papadopoulos, co-founder of the Luxembourg-based startup TheMarketsTrust to learn more about the real-time rating solutions the team is building.
(Featured Image, from left to right: Research & Innovation Team, Venetia Gkouli, Dr Krassimir Kostadinov and Prof Wim Schoutens / Image Credit © TheMarketsTrust)
What’s your solution about?
Each year, bank non-performing loans represent 4% of the total volume of loans. This means that in 2016 alone, the bank industry lost about $1040 billion! The main cause of these inefficiencies is the implementation of ineffective credit risk assessment processes, including outdated methodologies, as well as to the advent of extreme economical events.
At TheMarketsTrust, we are building the first real-time rating agency of the world where ratings are produced in near real-time by using advance models that are designed by a team of subject matter experts. Using artificial intelligence (AI), big data analytics and market news analysis, and combining quantitative and behavioral models, we completely automate the quantitative and qualitative assessment of credit risk on any class of financial instruments. In this way, we are addressing the need for cost effective, unbiased, accurate, timely and predictive ratings. In so doing, we are solving the asymmetric information problem as well as the issuer & payer conflict of interest and protect investors by send them early warnings signals on financial market crash. Using our solution, banks could decrease their impairment losses by at least 10%.
How did you manage the project’s time and budget?
The company was incorporated in May 2014 at Luxembourg. The majority of the shares are owned by the company’s founders, Enricos Manassis and Evangelos Papadopoulos. Our market size is estimated at 104 Billion US dollars where we are targeting 5% of market share within the next 7 years.
To support our growth and expansion to NY and Asia, we plan to reach out to venture capital investors and legal entities over the next 3 years with the objective to raise 15 Million US dollars.
TMT has achieved the following milestones:
- Dec 2014: Finalist at HEC Mercure Awards. This award recognised the top 3 innovative projects from the HEC Paris international community.
- March 2015: Leopard Workstation alpha release (TRL 6), integrating algorithms for behaviour and market sentiment analysis.
- May 2015: Awarded InnovFin SME Guarantee by the European Investment Bank.
- July 2015: Awarded SME instrument Phase 1 grant (H2020).
- December 2015: Invited to present at the 3rd Annual Conference: The World of CoCos.
- March 2016: TMT deploys a POC (Leopard Workstation) on a big asset manager firm.
- Jan 2017: selected in the London Accenture Fintech Lab
- April 2017:
- Awarded Microsoft BizSpark +
- Deployment of 2 POC within Tier One institutions
Which technology did you trust when building your solution?
In a few words, we see Microsoft as the most complete, integrated and mature set of cloud infrastructure. From office automation to Machine Learning and IoT, all the stacks that a company would need to create and operate their products, as well as running their operations are present in the cloud offering of Microsoft.
As well the operational excellence that a company needs to demonstrate, stems from the operational excellence of Microsoft cloud infrastructure. Finally, we see the region segmentation of the cloud infrastructure as facilitating in addressing the regulatory constraints of the various jurisdictions where we need to operate and provide our services.
Concerning the development realm, we found that Visual Studio suite as well as the new Machine Learning Studio suite are very impressive and help us to streamline our development process. Regarding the applications landscape: Office 365, OneNote, SharePoint help us to improve remarkably our internal collaboration as well as the Mobility.
Any learnt lessons you want to share?
Fund raising is still a very difficult exercise for all startups. Therefore, I will advise to secure funding that covers 2 years of expenses before starting a startup. There is also a new reality, FinTech is dead!
Indeed, due to the existing legacy in place and complex new regulation framework to be implemented, the financial industry is looking now only for enterprise ready solution. On the other hand, in the beginning, a startup can build at best a Minimal Viable Solution (MVS) which will require at least one or two year(s) additional development effort to reach an enterprise grade readiness level. This is why investors prefer now to invest only in company that bring new technology that facilitates the delivery of regulatory requirements (RegTech).
Last, the access to public national funding is still a very complex exercise for all startups. Concerning the Luxembourgish seed investors, many of them find that current tax legislation does not entice and protect them enough. For instance, Italy, Swiss, UK, France and Belgium seem to offer them a far better protection and fiscal leverage.