Companies in sectors like financial services and insurance succeed or fail on data, specifically how well they can use it to understand what people and companies will do next, a process that is increasingly being dominated by AI. Now, a startup founded in London's financial center called Finbourne has built a platform to help financial companies organize and harness data with AI and other models. The company has announced £55 million ($70 million) in funding, which it plans to use to expand outside the Square Mile.
The Series B was co-led by Hyland Europe and strategic backer AVP (the venture arm of insurance giant AXA), and after the funding the company is valued at just over £280 million ($356 million).
Finnborn co-founder and CEO Thomas McHugh told TechCrunch he came up with the idea for the startup after years of working as a senior quant in London, much of it at the Royal Bank of Scotland. One of those years was 2008, when RBS, then the world's largest bank, was disproportionately affected by the subprime mortgage crisis and came dramatically close to collapse.
This major change has manifested itself within the company in the form of a major organizational restructuring.
Previously, the entire bank was organized into a series of business silos that not only siloed the work of the people, but also the data within them. Running all of this was costly, and it needed to be reduced quickly. “We needed to take hundreds of millions of dollars of costs out of the business in a very short period of time,” he recalls.
They decided to take inspiration from the nascent but fast-growing world of cloud services. Founded in 2006, AWS was just two years old at the time, but the data team realized that it offered a compelling, comparable model for how banks should store and use data. So AWS, too, took a unified, federated approach to the problem.
“We've basically managed to build a massive amount of technology that works across all asset classes. Before, people said that this couldn't be done, but we had a big reason to change and we realized we could build better, more scalable technology from there,” McHugh said. He noted that the equity system, fixed income system and credit system all previously operated as separate systems, but are now one platform.
The 2008 UK financial crisis was a rollercoaster ride that, if it hadn't left him completely devastated, would have likely left him lacking confidence that he could withstand and weather any challenge. Not surprisingly, it prompted McHugh to take on the riskiest thing in business: a start-up.
Finbourne's roots may lie in how McHugh and the rest of his team tackled the challenge of building more efficient data services at the bank, but it has also evolved the idea to reflect and shape how financial services companies buy IT today. Just as companies with large sales operations use Salesforce (or competing platforms) rather than developing their own software, Finbourne predicts that financial companies will increasingly do the same — working with outside companies to get the tools they need to do their jobs, rather than developing their own.
This naturally coincides with banks and other financial services companies embracing AI.
The company's products currently include its LUSID operational data store, an investment and accounting register (used for asset management analysis), a portfolio management platform that tracks positions, cash, profit and loss and exposure, and data virtualisation tools.McHugh said Finnbone also helps manage how firms process data for training models and is likely to become more involved in this area.
The main takeaway here seems to be that there is no clear leader and banks don't want to share their data with other banks, so they are training how to avoid that. This process also helps customers to have more control over the outcome and prevents “illusions” from creeping in. Open source plays an important role in providing more flexible options for end users.
“What we've seen is that customers don't want the models that we've built or that we've used trained on other companies' data,” he said. “We're very conscious of that. By banning the use of other companies' photos, we reduce the chance that those models will hallucinate, so that's what we do.”
Finnbone currently has a range of competitors. For example, asset management rivals include Aladdin by BlackRock, SimCorp, State Street Alpha and GoldenSource. Alternative asset management rivals include Broadridge, Enfusion, SS&C Eze and Mya. BNY Mellon Eagle, Limes, Clearwater Analytics and IHS Markit all offer tools for asset owners. Asset servicing companies include FIS, Temenos, Denodo, SS&C Advent and Neozam.
The fact that there are so many brokerages may be a compelling reason to take the more simplified approach of dealing with just one, as has been done by firms including Fidelity International, London Stock Exchange Group, Baillie Gifford, Northern Trust and Pension Insurance Corporation (PIC).
“Over the past few years, Finnbone has built an innovative SaaS platform that has helped many of the world's largest financial institutions move from legacy siloed solutions to modern data architectures, enabling full real-time visibility and optimal decision-making,” Tony Zappala, partner at Hyland Europe, said in a statement.
“When the team first demonstrated in 2020 that it was possible to consolidate investment data from all assets held by a manager onto a single platform, I was hooked,” added Imran Akram, general partner at AXA Venture Partners. “Today, this is a clear differentiator, especially with the emerging wave of AI.”