Rebuilding Financial Infrastructure for the Web



We spend a lot of time looking at startups that are trying to disrupt the financial services landscape for end-users. These businesses are sexy and headline-grabbing… Everyone loves an underdog.

But there is another class of financial technology startups that are just as important: financial infrastructure. Communication networks, order routing systems, trade execution, clearing, account filing, reporting, risk analysis, fraud detection and account servicing – these are all infrastructure services that, while never seen by an end customer, play an important role as the “plumbing” in a well-functioning financial system.

When entrepreneurs launch new web-based businesses that service end customers directly, they must often rely on existing financial infrastructure for support.

The problem is that most current infrastructure was designed for a financial system that was at best handled in a network server environment and at worst handled with manual, over-the-phone exchanges. Yet, when entrepreneurs launch disruptive web-based businesses that service end customers directly, they must often rely on this existing financial infrastructure for support, much of which falls short of the necessary capabilities for today’s more innovative web-native financial technology companies.

However, a new generation of infrastructure providers is starting to emerge. Tradier and Robin Hood are Brokerage as a Service (BaaS) companies that allow web applications to execute orders electronically through an API. F2 is an open source framework allowing users to drop financial applications into a web-based container and make their own terminal. OpenFin is building the next generation of enterprise application layers through a much more flexible platform that can be delivered through a browser.

These companies are more than just B2B or enterprise technology companies. Together, they represent a move to make the financial system run smoothly and efficiently, which has always been a key element of the growth of the US financial system.

But there is a lot more to do. Finance is picking up and moving house from its old neighborhood of manual processes and server networks to a shiny new web-based neighborhood. Like all moves, once we get there we’ll need to find a new local support system, and usually we find out that these new pieces of our daily lives work slightly different than the old ones. For example, when you move from an urban to a suburban neighborhood, you may encounter a new drive-thru option at the local coffee shop – a feature that makes sense in the new environment but not the old.

We see this as an opportunity for a whole new generation of B2B financial services companies, ones whose need can be validated early by listening to the gripes of entrepreneurs having difficulty connecting to the old financial system.

What areas of Financial Infrastructure do you see needing a serious Web 2.0 upgrade?


Reprinted by permission.

Image credit: CC by Jewish Women’s Archive

About the author: Karl Antle

Karl is a Managing Partner at ValueStream Labs. He has significant experience advising and launching innovative financial services companies and projects across the US, Europe, the Middle East, and East Asia, most recently as a senior member of Oliver Wyman’s Financial Services and Private Equity groups.

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