The Coronavirus crisis has accelerated awareness that we need to shift our habits and behaviours to change how companies operate in order to build a carbon-neutral economy to make businesses more resilient to change in the future.
DreamQuark wants to be a major enabler of sustainable finance through technology and last year it initiated transformation to become a major player in this space.
It provides an end to end technology-driven approach to wealth managers enabling relationship managers and independent advisors to have a better 360° knowledge of their customers needs and goals that can be enhanced by responsible and explainable AI to provide actionable investment recommendations that deliver both economic return and sustainable impact.
Here Nicolas Meric, Founder of DreamQuark, explains its mission to leverage responsible AI to help financial institutions provide better investment advice to their end customers and accelerate their sustainable finance journey.
What has been the traditional company response to financial technology innovations nationally?
Coronavirius has increased acuity regarding the negative impact on biodiversity and the other environmental impacts of our economic activity, as well as our awareness on social inequalities that have become even more visible during and after lockdown.
There are many ways to solve these issues but it will require massive investments to operate this shift as well as new means to measure the impact of these investments which can not be only financial. Sustainable finance which integrates ecologic, social and governance criterias on top of financial criteria is the best way to enable the alignment between investment strategies and major decarbonation, biodiversity preservation or inequalities reduction goals.
How has this changed over the past few years?
Recently banks, asset managers and insurance companies have started to measure and report their ESG impact but have also built and distributed new sustainable financial products. At the same time, companies across the world have also started to measure and report these ESG criterias and developed ways to control their carbon emissions. These criteria have become a way to assess companies by investors who have also started to refuse motions when they were misaligned with their ESG goals and strategies.
Moreover, investors are now redirecting investments towards companies that are considered more sustainable and new regulations are being put in place to achieve Net Zero by 2050. This includes the European Non-Financial Reporting Directive or the “fit for 55” directives as well as labels to help investors better identify the most virtuous companies or investment vehicles.
Is there anything that has created a culture of change inside the company?
We launched a thorough analysis of our strategy during Summer 2020 to align our offering with the most important needs of our customers. We realized that we needed to be more focused around specific business use cases and simplify what we were doing in order to be a relevant partner of banks and insurance companies as their needs and priorities changed during the crisis. We also identified that to enable the adoption of AI within our clients, we needed to provide solutions for the end-users (in our case, the relationship manager), not only to the data scientists or business analysts. It has been a significant change for the company as we moved from a high technical company offering an AI platform to a really business-oriented company offering an AI-driven advisor portal.
What Fintech ideas have been implemented?
We have built an advisor portal to help relationship managers (RMs) to leverage AI to tailor investment propositions to their clients. Through this portal RMs have a prioritized list of commercial opportunities and alerts. They are generated through AI using internal data that can be enriched with external data. For each investment proposition, our algorithms provide an explanation with the reasons why this proposition is suited to the end investor, but we also provide the carbon emission associated with this investment proposition. This is aligned with the expectations of regulations like MIFIDII. We also provide AI-driven portfolio monitoring to ensure that the portfolio is still adapted to the investor profile and can recommend changes if this is not the case.
What benefits have these brought?
First, we have signed a major partnership with Atos specifically on sustainable finance. It has also improved the perception of our customers and prospects. It leads to new customer discussions, and we are perceived as more relevant and more consistent. Finally, we have developed new technologies around responsible AI and Natural language processing to enable future services.
Do you see any other industry challenges on the horizon?
The crisis has shown the importance of digital technology and many companies have had to adapt quickly to the lockdown periods to be able to serve their customers during this period. Customer expectations have shifted and now expect better digital experiences from their traditional providers. Financial services need to accelerate their adoption of digital technologies and be able to extract more value from their own data. Leveraging data with AI and successfully deploying AI in production as a way to accelerate their digital transformation is still a challenge for many firms. It needs to be addressed to provide a better customer experience at the level of what fintechs and tech companies are providing.
Can these challenges be aided by Fintech?
Fintech naturally develops and adopts technology to create and serve new digital experiences that become standards. Fintech and traditional players are complementary and traditional players should adopt fintech solutions to overcome their technology challenges and benefit from novel and more advanced technologies as well as the experience of the fintech which have already tackled these challenges, whilst fintechs can benefit from the scale of traditional players.
Multiple trends are disrupting traditional players in the wealth management industry including new competitors from other sectors and geographies, new regulations such as the new European AI regulation and new expectations from customers. While these are certainly threats, it is also an opportunity to seek new services and business models that can be enabled by technology while taking advantage of one’s own strengths. Disruptive trends are difficult to identify and becoming a technology company is difficult as it requires a really specific mindset. The best way to build an edge is to partner with nimbler technology players that have the understanding of these trends to combine their expertise with the traditional player expertise in a more distinctive way.