Further to the launch of Cartan Group last month, the team is excited to be working with the next wave of technology unicorns around the world.

Fintech (financial technology) is widely seen as a disruptive force in the financial services industry. But as billion-dollar companies in the fintech space (“Unicorns”) look to scale and expand their operations to robustly regulated and secure jurisdictions such as the Cayman Islands, Brandon Caruana, Co-Founder of Cartan Group, explains why the future looks bright for Cayman as an “Innovation Island” and the evolving role of technology in the financial services.

See below for more information. If you would also be interested in a follow-up discussion around the topic, Brandon would be happy to sit down with you and other industry leaders to chat through Cayman’s advantages in the space and the potential opportunities for our local economy.

Why the
Cayman Islands Needs to Believe in Unicorns

Fintech
(financial technology) is widely seen as a disruptive force in the
financial services industry. But as billion-dollar companies in the
fintech space (“Unicorns”) look to scale and expand their
operations to robustly regulated and secure jurisdictions such as the
Cayman Islands, Brandon Caruana, Co-Founder of Cartan Group, explains
why the future looks bright for Cayman as an “Innovation Island”
and the evolving role of technology in financial services.

Modern media
would have us believe that financial services and fintech startups go
together like fire and ice. Ever since rapidly growing, highly nimble
fintech firms broke into the mainstream, many regulatory bodies and
financial institutions have regarded them cautiously – sometimes
even with hostility. More recently, however, forward-thinking
financial centers have transformed the way they engage with these new
technologies, leveraging their islands’ legislative and regulatory
frameworks and depth in expertise to attract some of the
best-structured fintech companies.

The Cayman
Islands needs to embrace this new economic model, foster innovation
through programs like Code Cayman (women.codecayman.com)
and attract other scalable startups that have the potential to scale
into billion-dollar behemoths. In short, Cayman needs to strengthen
its financial service dominance by becoming a software-based
Innovation Island.

10 Years
of Technological Boom

In 2011,
American tech entrepreneur Marc Andreessen, declared that, “software
is eating the world.” The cost of computing power had dropped to
the point where: $25 computers could be built; a global communication
network had been deployed; more than 2 billion people were connected
to the internet; huge data centers had been fully automated; and
anyone, anywhere now had access to the infrastructure that could
transform any industry. Data was the new gold and building rapidly
scalable business models that could now be developed by a micro team
of geographically distributed individuals.

Fast-forward
to 2019 and software has indeed devoured huge portions of many
established industries – or, in some instances, created entirely
new ones. Now these software development teams have set their sights
on the biggest industry in the world, the finance industry.
Previously, the capital and resource requirements of entering a
regulated industry, such as payments or financial services, kept most
of this disruption to non-regulated industries and didn’t have a
significant impact on the Cayman Islands’ business model. However,
this is now rapidly changing as investors and venture capitalists
realize huge gains from the disruptive success of the past decade.
Large capital allocations are being deployed to software companies
that promise to build tools which will revolutionize the entire
financial sector (including banking, payments, pricing, capital
markets etc.).

Why the
Future Looks Brighter Together

The outcome
of not adopting an integrated software approach can be seen through
the lens of the early battle of smartphones. In 2008, early
smartphone adopters declared they could not live without their
Blackberry, but by 2009 nobody knew what a Blackberry was. It wasn’t
that Blackberry’s largest competitor, Apple, made a better hardware
device; it was that Apple made better software and allowed everyone
else to create better software on top of their software. A decade
later 5 billion people have mobile phones, of which, almost half are
fully integrated smartphones that connect to the internet.

That is an
enormous addressable market which continues to grow at an
unprecedented rate. Each individual in this market streams millions
of data points to systems that aggregate and analyze the information
to make better decisions and provide better advice. These systems are
distributed around the world, integrated into other systems, managed
by a workforce that is disconnected from the outputs, and owned by
corporations that are further distributed around the world. Cayman
does not need to be a datacenter hub for global data flow, it simply
needs to leverage its current financial and legal expertise and grow
the software talent pool to create a better data driven ecosystem for
high growth businesses to thrive.

The power of
data driven decisions is magnitudes more efficient than the current
committee processes that still dominate many incumbent organizations.
For example, many service companies still rely on a committee to
review and decide whether a new client poses a risk of nefarious
activity and represents a profitable opportunity. This process is
typically driven by an onboarding form that is analog in nature and
poorly identifies enough data to power a statistical based analysis.
If a bad actor is going to engage in nefarious activity a vendor can
be assured that the actor will have no hesitation to use easily
accessible software to manipulate or circumvent an outdated analog
requirement specification. A manual, checkbox driven workflow does
not provide a sufficient stream of data to capture, identify and
report suspicious activity.

Success
Through Innovation

A more
efficient means to manage this process is to collect structured data,
integrate it into multiple niche systems and devise an algorithm that
can aggregate all data points to make a probability-based prediction
on the risk and reward a potential (or current) client poses. The
beauty of this system is that it would not need to stop after the
onboarding process is completed but rather continuously collect and
adjust against all new data points and continually update its
probability score.

As companies
worldwide start to operate at the speed data driven infrastructure
allows them, analog service providers will become a bottle neck of
inefficiency. Legitimate clients will simply begin finding more
efficient service engines to power their infrastructure while
nefarious clients will grow as they find it easy to outsmart the
process. Capital flows like water down a hill, it will always find
the path of least resistance. If the inefficiency costs are greater
than the structural benefit (the sum of the tangible and intangible
resources committed), clients will simply find more efficient
vehicles to operate from.

The Future
of Fintech in Cayman

Unicorns
(billion-dollar companies) are started with little more than an idea,
access to capital, a stable economy and a few smart-innovative
individuals who have the confidence and vision to build industry
changing systems. They rely on data, talent and the global computing
infrastructure to adapt to market conditions in real-time and iterate
their service to capitalize on opportunity. Small ambitious teams are
able to move faster than large institutions and solve market
inefficiencies with pinpoint accuracy.

Cayman offers
many of the advantages of a modern city as well as the lifestyle,
first class talent and capital access that affluent technology
entrepreneurs and engineers look for. By attracting nimble and
scalable unicorn companies and combining their data driven models
with the experience and expertise incumbent institutions have, Cayman
can provide a seamless integrated software-based experience that will
fuel economic growth, provide jobs and establish Cayman as
first-class innovative island.

- ARTICLE
ENDS -

About the
Author

Brandon
Caruana is an information technology leader with over 15 years
of planning, developing, managing and monitoring the successful
rollout of complex technology solutions that improves operations,
reduces costs and fosters employee collaboration. Brandon has
developed and delivered several multi-million-dollar projects within
the financial services industry and the digital assets industry. His
expertise has been recognized by the Cayman Islands Government and
the Cayman Islands Monetary Authority and he is often requested to
advise on best practices in the digital assets industry. He is a
member of the Financial Services Legislative Committee’s FinTech
Subcommittee and a founding member of the Blockchain Association of
the Cayman Islands. He most recently developed the first and only
regulated proprietary digital asset custody solution in the Cayman
Islands and has been recognized as a driving force for corporate
innovation.

About
Cartan Group

Cartan Group
LLC is a Cayman Islands-based management consulting firm offering
digital strategy, data and analytics, and digital transformation
services to institutional clients around the globe. Founded by
fintech experts, Brandon Caruana and Brian Tang, Cartan helps clients
to embrace the most cutting-edge innovations to evolve their
businesses. Leveraging their expert teams and global network, Cartan
uniquely delivers end-to-end digital, consulting and technology
solutions with deep experience in data analytics, corporate finance
and governance, as well as emerging technologies like blockchain,
cryptocurrencies and other digital assets. For more information,
visit www.cartan.group.