Can IT priorities shift from business continuity to revenue and cost dimensions, especially in the tough months that 2020 slapped on many businesses? Can retrofitted or sloppily designed IT ever compete with players who have invested in digitisation way before the pandemic made it a must have factor? Why is AI a good bet and blockchain on the wait-and-watch list and a finance-major deepening AI investment in NLP, data, and governance tracks in particular? Babu Thiagarajan, Country General Manager and Head of Technology, India at Fidelity International, tells us about these and a lot more as he shares the risk-and-return horizon of a very peculiar asset called ‘technology’.

Let us start with something about the post- COVID world. Do you have any specific gameplan for investing in new areas or building existing areas for using technology as we move towards the near future?

Fidelity International is constantly looking at a handful of new technologies and their relevance for the industry we are in. We categorise our approach based on the time horizon in which we feel those technologies can be applied in our context. The current focus is on digitising as much of our current business processes as possible. Given our prior investment in these areas, this is about focusing on accelerating our execution on these plans.

One such technology with near-term application, which we are currently focussing on, is artificial intelligence (AI). It is maturing at a great pace and we have seen favourable development in associated, but necessary, aspects like governance. This will help with its adoption in mainstream areas. We are looking at deepening its adoption in areas which benefit from machine learning and natural language processing, in combination with robust governance of those areas. Combining AI tools and techniques with traditional analysis techniques opens the opportunity to find very valuable insights. But let’s not forget, these technologies are only as good as the quality of the data. So, we are investing heavily in our
data strategy.

Another emerging technology with similar time horizon applicability is Mixed Reality, which leverages multiple approaches such as Augmented Reality (AR) and Virtual reality (VR) to create a hybrid application, especially in this hyper-distributed world. We continue to investigate and stay engaged with far horizon or beyond horizon technologies like the blockchain/crypto, advances in
cryptography etc.

What is it like to start something in the industry first, like the first mainframe, the Pebble smartwatch app, the first Bitcoin experiment? Also, can you share something about offerings like Fidelity Spire, the digital store – Wealthscape Integration Xchange – and crypto mining investments?

Well, we are certainly proud [of those initiatives]. But our sense of accomplishment comes from finding
meaningful applications for these technologies in a way that helps our customers reach their investment
goals. This includes recognising that investing habits of customers will change with time and we need to be continuously prepared to serve those changing habits. That is the reason why we recently launched Fidelity Wealth Expert, a digital asset management platform, to meet the changing needs of digital-savvy savers and investors. In addition, Fidelity International makes strategic venture investments into the most promising earlystage fintech globally and super-charges their growth through the capital, operational support and industry expertise, including companies such as the Indian online investing platform Kuvera, or SteelEye, the regulatory technology company.

Can technology help in solving issues like fee compression, money laundering, and risk in wealth management, passive investing and negative interest rates?

Technology already plays a role in helping in these areas. All the above processes are data-intensive, and
technology already underpins the volumes that are being processed in a timely, and reliable, manner. However, targeted improvements in operational processes using technologies like AI, RPA will help optimise costs even further. We are also leveraging technology in unique ways in our investment management process, that we call Systematic Investing, to build highly customised, alphagenerating
solutions across a range of asset classes to offer our clients the benefit of variety and value.

Is it too early to bet big on blockchain, fintech, roboadvisors and AI in this space? Is there anything that you have been learning from Nutmeg, Moneyfarm, Vanguard and Hargreaves Lansdown – especially from incidents like the Nutmeg-Unbiased error?

The bets are going to be varied for the different areas being referred to. You bet on fintech not only for its immediate applicability, perhaps to manage a gap you have in your capabilities, but also for the future potential. A bet that is balanced across those dimensions remains a good one. AI, as mentioned earlier, is maturing very well and is a good bet for most enterprises. The governance frameworks have also caught on very well to provide the essential guardrails. However, you have areas like blockchain, which have found some applications but not at the scale and the ease anticipated. This is one area where we require a consortium to come together around a proper use case for it to gain mass adoption. We learn all the time from the challenges that are faced within the industry. The governance and controls being introduced in areas such as AI help in managing the potential for unintended consequences.

Can high-touch and automated wealth advisory ever replace the personalised texture that highbracket customers need from wealth management and advisory firms? Does technology cannibalise anything here?

We don’t see these as competing propositions. In fact, we see one making the other better. There is also a
change we need to recognise: always available, easy to use, self-service options are, and will be, increasingly preferred by so-called high-bracket customers as well. Technology also adds many new dimensions to digital engagement and experience. But it needs to be directed by well trained and experienced advisors on how that tech can be tailored to deliver a better experience for customers.
So, our approach is to make sure that we provide superlative experience to our customers in whatever
mechanism they chose to engage through. From another angle, technology has a differentiating role to offer in its ability to process ever-increasing volumes of data that underpin much of the advisory inputs to customers – whether in person or through a digital mechanism.

What are the headaches and priorities of CIOs and CTOs in the pandemic phase? How much help is coming from technology and exactly where?

In these unprecedented times, clearly, ensuring business continuity was the first priority. However, very soon our priority shifted to enabling revenue and cost objectives.

Interestingly, two categories of companies have emerged from this pandemic. One, the companies where
CIOs/CTOs had already embarked on a digitisation journey across their businesses – not just in ER P
platforms, but for collaboration, for protecting customer data and to meet regulatory requirements. They were able to scale the operating model for their businesses much faster without incurring significant unplanned costs. The other category of companies where the CIOs/ CTO s had not planned for this digitisation journey and had to go through a costly two-step process – first to implement poorly-designed tactical solutions to get the business up and running, and second to retrofit that tech infrastructure with sustainable longer-term capabilities. I think the second category of companies is still struggling as their restricted investment ability will make it more difficult for them to operate. If they survive, they will concede market share to competitors as and when things return to normal.

Technology is the secret sauce for the success of a business, so it is not a question of how much support technology is providing – it is the only way to succeed. CIO s/CTO s need to work with their management teams and boards to have a robust conversation on the share of investment dollars with immediate effect. There must be an underpinning technology strategy and investment for every aspect of any business. A great example: a simple aspect of signing paperwork was relegated to the depths of technology investment backlog. Many CIOs didn’t even think about that, but companies that had digital tools to process such paperwork were much better placed in responding very effectively to the very dynamic regulatory environment now.

Please note the article was originally published in the in November 2020.

The opinions expressed are author's own. Fidelity International is not responsible for the author's opinions.