[HN Gopher] Open source is coming to financial services
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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.
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