Move Forward But Don’t Forget

As a CTO I have been awed by the multiple options for the business application of new technologies. I always put myself in the place of our customers and understand why there are so many organisations grappling with the power of the Blockchain and Artificial Intelligence (AI) and how to make them real. From my days working at a large financial company I always remember the most important commandment “never block the trade”. As an industry we have grown from the commandment, and others have been added, “Make sure we can audit the trade”, “We must be able to report the trade”, “We need to make sure the trade is funded” and I am sure there are additional commandents which can be added, such as “trades should not break between counterparties”.

As I review these commandments and look at how AI will allow for trading to happening at a faster and ’intelligent‘ rate, the other commandments cannot be ignored. AI will create havoc on the post processing of data, since there will be algorithms which merely provide results, but not how the results are derived. How will an organisation provide a repeatable process to prove to an auditor or regulator that the same set of inputs will guarantee the same answer? These questions will require post processing to use AI output and provide a data lineage to provide the history needed. Current processing will not necessarily need to change, but rather provide a new paradigm to ensure the output of AI engines remain consistent as the data which learned the algorithm may deviate from the original learned. In addition to algorithms which are unsupervised, there will need to be safety nets to ensure the engines do not run amock. 

Financial organisations will need to bridge the gap between distributed ledgers and the ledgers being used to run internal finance. Internal ledgers will achieve this by having the same positions mirrored/duplicated. Distributed ledgers will reduce the amount of errors since the positions will have instant approval against a counterparty. The very same organization will need to ensure the internal ledgers have the same positions, and this is where organizations will need to continue using technology to ensure the distributed ledger matches the internal ledger. Transactions will become faster and accurate externally, and internal tracking will become more accurate, but data lineage is necessary to ensure external and internal parties match. 

In the long run, as technology moves ahead the same issues remain and those organizations which can leverage BlockChain and AI to make faster processing, need to ensure the commandments are not violated.

Published: 19 June 2018

Author: Rocky Martinez

Source: https://www.finextra.com


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