[HN Gopher] Open source is coming to financial services ___________________________________________________________________ Open source is coming to financial services Author : jseliger Score : 126 points Date : 2021-10-15 15:54 UTC (7 hours ago) (HTM) web link (future.a16z.com) (TXT) w3m dump (future.a16z.com) | m-i-l wrote: | Another Strange article from A16Z. Open banking (PSD2 etc.) is | primarily about open data and open APIs, not necessarily open | source. | fijiaarone wrote: | Buzzwords are coming to venture capital marketing hype. | ericmay wrote: | A16 should remember that _they_ also provide financial services | and this same thing is coming for them too and might come for | them more quickly than traditional banks. | hn_throwaway_99 wrote: | I feel like a lot of comments are missing the point of this blog | post. In the past 5 years or so, there has been an explosion of | "XaaS" API companies that many of the new fintechs or "challenger | banks" build on top of. For example: | | 1. There are lots of Banking as a Service platforms for fintechs | that want to essentially be the end-user facing platform, but | then funds are held at a chartered, FDIC-insured bank. Companies | like Q2 and Treasury Prime. | | 2. There are then a slew of companies for things like Card | Issuing as a Service, KYC as a Service, Fraud Monitoring as a | Service. Companies like Stripe, Marqeta and Lithic on the card | issuing side; Alloy, Socure, Unit21 on the KYC side; Sift on the | fraud monitoring side, etc. | | This post is basically arguing about open source companies | providing "lower level primitives" in the form of libraries that | people can build on top of, i.e. libraries for creating and | processing ACH files, sending and receiving wire transfers, | financial ledgers, syncing for required OFAC checks, etc. | Building these things from scratch today is extremely difficult, | not just because it takes time, but because (at least to me), it | feels like so much stuff in the financial industry is poorly | documented, or perhaps its better to say that the documentation | is only half the story - what is required in practice and by what | regulators really care about just takes "tribal knowledge" from | banking experience. | | Not saying one way or the other whether I think the author's | thesis is correct, but I think it's a good topic for discussion, | and is orthogonal to things like Open Banking APIs. | darcys22 wrote: | This has also been my opinion for the accounting industry. Just | like c compilers before gcc were proprietary and poor performing | the accounting software that exists has many limitations. That | means there is a huge opportunity for an open source system to | blow them out of the water. | | Ive been building one myself but i know there are many more | coming for this industry :) | | https://github.com/darcys22/godbledger | pid-1 wrote: | Cool stuff, most banks, brokers and hedge funds have no FOSS | culture. | | That said, the major blockers for financial services, at least in | my country, are sort of unrelated to open source software being | available. | | Thinking about the most basic questions one needs to answer to | start a fintech: | | 1. I want to create a bank. How do I do that? | | 2. I want to issue credit cards / lend money / make a payment | system. How do I do that? | | 3. I want to start an investment fund. How do I do that? | | Those are just some examples, but each one of those questions | lead to infinite rabbit holes of laws, regulations, bizarre costs | and arcane systems to integrate to. | | I have more experience with (3) and stuff like getting reliable | market data, connecting to brokers and exchanges, sticking with | compliance rules, etc... are easily the most painful and costly | bits of my job. | fijiaarone wrote: | These are the three biggest questions that keep the financial | services sector (at least those who think about technology and | innovation) up at night. | | 1. How can I prevent someone else from creating a bank. | | 2. How can I prevent someone else from being able to issue | credit cards / lend money / make a payment system. | | 3. How can I prevent people from being able to make investment | funds. | molsongolden wrote: | In the USA, there are XaaS solutions for most of these now. | | It's possible to start a bank, issue cards, facilitate | payments, etc. all on pre-built infra + APIs and your job | becomes building the user experience and customer/vertical- | specific tools on top. | blitzar wrote: | #1 & #2 dont touch with a barge pole. | | #3 get a copy of excel. | bloudermilk wrote: | What would you suggest as a good starting point for a founder | looking at (3)? | monkeydust wrote: | Man the a16z marketing machine is working hard unfortunately at | cost of quality. | | For those interested in FS and open source today, especially | through a capital markets lens check out: | | https://www.finos.org | | Lots of great projects, one I used recently and a favourite was | this: | | https://github.com/finos/perspective | hn_throwaway_99 wrote: | I went to the finos website and looked at their list of | repositories, and literally none of them looked like things I'd | be interested in _from a financial services /banking | perspective_. I saw a lot of very "high level infrastructure" | repos for things like processing JSON, standardizing models, | etc. The example you gave, Perspective, honestly looks like the | most interesting of the ones I saw, but it's still a generic | data visualization component. | | I contrast that with the Moov.io repos (full disclosure, I'm | familiar with them though I haven't contributed), and they're | actually nitty gritty details of dealing with the banking | system (at least in the US), things like processing ACH files, | wires, ISO 8583 (card network) messages, Image Cash Letter, | watchlists needed for KYC and OFAC checks, etc.: | https://github.com/moov-io | | TBH it just sounds like a very apples-to-oranges comparison. | texodus wrote: | I work on perspective, glad you dig it! We just released 1.0 | this week after 4+ years of open-source-first development. | | Perspective was, in a previous life, a proprietary internal | engine for Python/desktop applications at JPMC, that was ported | and open-sourced to FINOS as a web assembly based browser | component. Open sourcing perspective had a huge impact on the | project, not just from the awesome community contributions and | engagement and support from FINOS itself, but (as a huge | surprise to me) the perspective project's visibility within our | company. | 094459 wrote: | Odd that this post omits any mention of FinOS, a pretty | significant stakeholder in open source and financial services. I | wonder why they missed that out? | lsiebert wrote: | Wonderful. | | One of the things I'm most concerned about is how credit card | payment processors and banks basically define what you can easily | buy online. Something can be perfectly legal, but if there's no | way to pay for it, it won't be available. | joshuaissac wrote: | > While fintech has traditionally been default local -- most | banks are driven by country-specific regulations, infrastructure, | and consumer payment preferences -- many global companies are now | adding financial services. | | This is not true at all. Regulations that span multiple countries | like the EU's MIFID I (2007) have been around for a long time. | Even institutions in countries outside these markets would need | to comply when they want to participate in the market. One of the | companies I worked for previously has been licensing financial | software (including those implementing national and international | regulations) for decades to financial institutions across world, | and they were not alone in their market. Going global is nothing | new in this industry. Neither is open source. QuickFIX, for | example, is two decades old. | villasv wrote: | Americans are very comfortable in extrapolating the US | experience as a global reality. | | Here they're talking about the Wild West of small banks that | they have. | fakedang wrote: | That was precisely my thought when reading this article. | | Literally how many startups spawn in America for simple | financial tasks that are easily handled by banks in the UKEU? | In some cases, there are banks in India and most of the | developing world that have more advanced services for | consumer banking than the US. China has obviously already | raced ahead far more than the US. | squiffsquiff wrote: | Financial services are already all over open source software. | What even is this article? | | AWS heavy open source base: https://aws.amazon.com/financial- | services/ Gcp, same story: | https://cloud.google.com/solutions/financial-services | sumtechguy wrote: | Yeah this sort of feels like one half of an advert campaign. | The 'build a need' part. Then a bit later we will get to see | who is selling something that just happens to fix it. The links | you gave are more for 'banks like to keep their stuff in house | but we can keep it secure if you rent our machines'. | webmobdev wrote: | I'll believe this when banks start using Postgres ... it's | amazing the stranglehold that Oracle has in this sector (I mean, | when considering the price they charge). | zz865 wrote: | This is just fluff. Financial services and banks are not the same | thing. The biggest problem with banks in the US is no free | accounts, we need banks with physical branches to offer accounts | for poor people to have. There is no money in this so a16z would | not be interested. Everyone else is looked after already. | fijiaarone wrote: | Why do people without money need to have bank accounts? | | If you answer is: To be able to make payments | | Then maybe a better question is -- Why should people need bank | accounts to make payments. | | Note: Banks are not likely to ask this question | reaperducer wrote: | _we need banks with physical branches to offer accounts for | poor people to have._ | | Coming soon to a USPS near you. It'll be like 1965 again. | molsongolden wrote: | There are free bank accounts at many banks? | | Also, lots of neobanks are offering free accounts and features | because their revenue comes from interchange on spending + | interest + future cross-sells or lending. | greenail wrote: | You could argue that it is not the technology stack that creates | a barrier to entry for financial services but rather the existing | relationships and levels of comfort with the regulators. | | Said another way, let's assume the regulator is not keeping up on | the latest and greatest trends. Let's also assume the regulator | wants to avoid adding lots of extra work and due diligence. We | could assume the regulators were not quite as smart as the higher | paid banking executives. What do you think the response will be | when you push for big changes that need to happen quickly? What | incentives exist for regulators to change? | reggieband wrote: | I don't like to be too negative, but this article feels like a | senior partner or committee brainstormed article topics and | assigned it to someone else. It's almost like someone started | with an outline of the headers of each article section and the | contents were filled in with the most obvious possible content. | It feels like the kind of topic/article that GPT-4 or later will | pump out en masse in the not too distant future. It's as if | someone at a16z said "we need more blog content and we want an | article on open source finance" and this was the result. | | On the other side, I appreciate that VCs like a16z are pushing | forward these ideas. I don't necessarily think this article is a | reflection of the current reality but it does suggest a future. | It signals that a16z is looking for startups to invest in to move | this space forward. | bob1029 wrote: | As someone who develops software products for the financial | services sector, I can assure you that the thing most | stakeholders are looking for right now is simplification of | operations, not sharding operations out to _even more_ vendors | (OSS or otherwise). | | Every single one of our customers is looking for a path back to | something that looks like the mainframe in terms of vertical | integration of the business stack. Most got taken for a really | bad ride by legions of consultants over the last ~2 decades and | now have to visit 5-10 different system interfaces to take care | of a single customer - A horrible combination of green screen, | web sites and random pieces of paper that have to be scanned in | just right. The list of procedures for some types of activities | is bigger than the stack of disclosures the end customer | receives. | | Many of our clients are stuck in some contorted stance with half | their stack in AS400-land and the other half scattered to the | various "cloud" services which are mostly just random | websites/services with shitty SOAP APIs (or no APIs at all). | | The only financial services companies that are seeing positive | uplift from these sorts of initiatives are those with enough | resources to try this path, fail at it, and then decide they | wanted to build 100% of their own stack in-house anyways. | [deleted] | arminiusreturns wrote: | My observation is that everyone is looking to simplify and | streamline operations, and the financial sector just suffers | more from faults in the pipeline due to every entity being a | special snowflake. That said, a proper foundation for these | things really isnt that unique to finance imho, once you get | past a few of the outliers. My problem is this: you can know | how to do this, but the largest hurdle is the army of | incompetent middle managers who filter any truth from | technically out of date c-suites. No amount of "tech stack" can | fix these human problems. | | I find myself considering if I even want to turn my years of | experience into a bunch of ML-ops rules for these people in the | first place... | bob1029 wrote: | > No amount of "tech stack" can fix these human problems. | | This was the most painful lesson we had to learn so far. | | The bootstrapping is the hardest piece looking back on the | last half-decade. Once you figure out how to make 3 different | customers work using the same code pile, you are moving in a | good direction. Implementing for 1 customer at a time in a | serial fashion is a path for guaranteed failure if you are | expecting to just copy that code pile to the next one and | have it fit their needs. We tried to do this 3 times and only | by the grace and understanding of our angel investor are we | still doing business. | | My new job is to ask the question "Will this | feature/function/enhancement work for all current _and_ | future hypothetical clients? ". Forcing the team to think in | this way was a challenge, but it's kind of our default | mindset now. When you guard for bullshit like "what if the | account number is longer than 64-bit integers for some future | customer?", you trivially-sidestep things that have literally | killed other businesses. Clearly, you can take all of this | too far, but only if you actually implement in code the | proposal before realizing your mistake. | mttddd wrote: | yep, a lot of this is fallout from the financial crisis and all | of the bank mergers that have happened. A number of the big | banks i worked with a few years ago had sooo many different | systems from all their acquisitions and what they really want | is one | bob1029 wrote: | This is an excellent point. It's fun to blame consultants, | but the amount of M&A that has occurred can probably be | implicated for half of the complexity seen in banking today. | | The nuance with M&A between 2 banks is that one usually | "wins" in terms of the core tech (i.e. where all the | customers and accounts are ultimately stored) and absorbs the | other. There are companies that specialize in this exact | activity. The part where it gets super messy is with the | jurisdiction-specific systems & procedures that have to be | folded into 1 operational space. | mamcx wrote: | I relate to this. Is not just a lot of vendors, is that the | kind of software stack that is optimal for _MOST_ enterprises | /companies get out of fashion in the dev community and is | replaced with a lot of moving gears. This is how many devs | think JS/html are good for UIs or NoSql + micro-services are | ok. | | What is this stack? A single, strong, RDBMS and a | lang/environment like FoxPro/dBase and equivalents. For | reasons, this stack was killed (intentionally?) by their own | owners and replaced by a lot of moving parts. | | That is why for deploy something you need dozen of things! | | --- | | I think the time is ripped for a return to this kind of stack. | I'm betting a little on it at http://tablam.org, if wanna check | a small part of the puzzle. | [deleted] | 3maj wrote: | >The only financial services companies that are seeing positive | uplift from these sorts of initiatives are those with enough | resources to try this path, fail at it, and then decide they | wanted to build 100% of their own stack in-house anyways. | | The issue is a lot of the executives that join the bank's | C-suite after 10-15 years of experience usually come from | consulting... And as you can imagine they keep hiring and re- | hiring their old firms to have 2-3 business graduates come and | make a PPT telling a room full of engineers and developers how | they should be building complex systems. | bob1029 wrote: | > and make a PPT telling a room full of engineers and | developers how they should be building complex systems. | | This is unfortunately not an experience I am unfamiliar with. | I have to pretend to eat a big plate of humble pie on the | first technical call with a lot of our clients. | | Once you learn their first reaction is going to be to reject | your proposal on arbitrary grounds (i.e. a new security | theater show), you start to present simpler proposals purely | for the sake of tripping their initial response. Once you get | them to fire their objections across the way, it is really | easy to review the impact and build the real proposal that | meticulously deals with each point that was raised. | djbusby wrote: | I'm having this exact issue now. For me, your timing was | perfect, thanks. | walterbell wrote: | Priceless and timeless advice for both internal and | external engagements. | nostrademons wrote: | This is usually good advice for _any_ time you 're selling | a proposal. Your first attempt is going to be shot down. | The more detail it has, the more ammunition there is to | shoot it down. So build the minimum viable presentation | that's going to trigger an emotional response and tease out | the _actual_ issues. Build the real proposal once you 've | triggered your customer into revealing what's actually on | their mind. | cynusx wrote: | It's always helpful to make the distinction between problems and | solutions; it's true that traditional finance providers are | horribly stuck in legacy systems, however their main problem is | not so much that they are unable to rebuild. Their main problem | is that decision power is so federated across the organization | that it's impossible to even decide to rebuild their stack in a | vertically-integrated way. | | The only way an organization can revamp this is by actually | owning the technology entirely in-house and building up a | completely independent product and engineering division. | | At the end of the day, changing code is orders of magnitude | cheaper than a change management project with 12 managers and | mandated retraining of 400 internal personnel. | | In my humble opinion, this type of change in the financial | services industry can not come from incumbents. | brighton36 wrote: | Why isn't there a more robust commercial space around | plaintextaccounting.com? I would have thought text/journal would | at least be a mime type by now... | zz865 wrote: | > Just as modern architects can source the best-in-class parts | from around the world to customize a home for its occupants | (windows from Italy! toilets from Japan!), | | Good analogy. This stuff doesn't apply to 99% of us. | Ericson2314 wrote: | I dunno, all I want is Federal Reserve accounts at the post | office, thank you. | | Develop the code in-house, and it will be guaranteed open source | for! | reaperducer wrote: | _I dunno, all I want is Federal Reserve accounts at the post | office, thank you._ | | It's coming. Already being tested in Baltimore, The Bronx and a | few other places. | Ericson2314 wrote: | I am stoked, but it will be a fraught process. Right now it's | being rolled out as "a payday loan alternative"---i.e, it's | for poor people. | | Historically, trying to avoid political battles by making | services poor-only (whether means testing or otherwise) has | been loosing strategy as the Republicans let it through | (battle win!) but the service becomes shitty and | paternalistic without a strong broad electoral mandate. | | The key is making something just about everyone will want to | use, letting people vote with their feat, and then it becomes | untouchable. | | We need the accounts to make UBI stick, but perhaps we should | think about it the other way too. Next crises, don't bother | with people's existing accounts and instead say "there's a | check waiting for you with your already-existing PO account". | | Just like Facebook getting people to make shadow account for | their friends and spamming you to claim in the olden days! | lordnacho wrote: | Hedge fund guy in me thinks this is all marketing. | | The whole XaaS picture thing looks like a nice OSI stack type of | thing, but it's not how the systems work together (funnily enough | networks don't work that way either lol). They're more like a | graph, maybe a bowl of spaghetti. For instance the compliance | part reaches into everywhere. You can't just write an API layer | and do .complies() -> bool. Some of it even requires you to | implement PTP timestamps. And it certainly reaches into | reporting, where you have all sorts of strange requirements. I | recently looked at a file with over 100 columns to be populated. | | Having said that there's plenty of use of OSS. I've rarely been | anywhere that doesn't use Linux or git or various other common | software. I haven't seen a lot of proprietary languages either | (Delphi/Slang/Matlab). | rexreed wrote: | What is the agenda pushing here? This is clearly not a push for | change in the actual financial services or banking sector. Is | there an attempt to shift power away from "traditional" banks to | "untraditional" financial services institutions. The idea of Lyft | being a financial services provider has me more concerned than | optimistic. I don't want a service intermediary controlling the | financial future of the person providing the service. Scary. ___________________________________________________________________ (page generated 2021-10-15 23:00 UTC)