How AI Could Impact the Industry

digitalPublished in DS News  – OCT 2018 

To many in the mortgage industry, the rise of artificial intelligence and machine learning—or AI/ML technology—seems inevitable. In fact, other industries that manage large amounts of data, such as health care and transportation, have already begun adopting these digital technologies with relative success. In the spirit of the times, Fannie Mae has released a survey that gauges the rise of automation among lenders, as well as their overall attitude toward the technology.

According to the survey’s results, a majority of lenders (60 percent) have some knowledge of AI/ML and its capabilities, though only a little more than a quarter (27 percent) have begun utilizing AI/ML specifically for their business. Among those who have, the majority are large and mid-sized institutions (42 and 40 percent, respectively), while 60 percent of smaller institutions have yet to tinker with the possibilities. Still, over half (58 percent) of all lenders surveyed by Fannie Mae anticipate the integration of AI/ML within the next few years.

Most of those surveyed seem evenly split about the most promising aspects of the technology, with more than half arguing for improved efficiency while the other half put the focus on enhancing the borrower’s experience. Among those lenders who have begun adopting the technology, it has been used primarily to analyze submitted borrower forms in the origination or underwriting process, as well as for the auto-indexing documents and routing tasks among employees.

Machine learning and AI also hold much promise for the servicing side of the business too, in the form of improved security tools and AI-driven customer service features such as voice-activated virtual assistants and chatbots to address customer questions.

The Fannie Mae survey suggests that the biggest hurdle to the implementation of more AI/ML technology within the industry is existing business infrastructure, followed next by the costs and a general skepticism that the technology will prove more effective. Twenty percent of lenders lack the necessary skills to utilize the technology, which presumably would require additional training.

Tracy Stephan, Director of Economic & Strategic Research with Fannie Mae, summarizes the survey’s results on their website here.


Published in Forbes Magazine  – OCT 5, 2017  

Startup Targets IBM In $27 Billion Middleware Market

If you’ve ever been to a bullfight in Madrid, you know it’s a savage, bloody affair that brings out waves of nasty human emotion. The cascade of cruelty begins with the picadores who seek to enrage the bull by tossing lances (picas) into its pelt before the bull’s encounter with the matador.

This comes to mind in considering IBM. This year I’ve written about five companies that are tossing picas into IBM’s pelt by attacking big markets in which IBM competes. These startups are growing much faster than Big Blue by offering customers better solutions to their problems at a lower price.

The question that persists in my mind is how long it will take before this enrages IBM’s board of directors enough to do something about it.

In the meantime, here is a sixth startup that’s targeting the $40 billion market for so-called middleware in which IBM participates through its WebSphere and InfoSphere products.

Before getting into that, here are five I’ve written about in 2017:

  • Identity management is a $2 billion market for protecting computer systems from unauthorized users features smaller rivals like SailPoint that has been growing at 30% a year to $130 million in revenue on the strength of its product development and culture.
  • Process improvement software is a $15 billion market that helps companies make their business operations more efficient. One startup, Celonis, automates the development of process maps and expects to triple its revenue this year as it takes market share from IBM and others in the SI industry.
  • DevOpsis a $2.3 billion market whose products cut the cost and shorten the time to market for software development. Xebia Labs is a DevOps supplier growing at over 100% a year and is likely to keep growing that fast this year as it wins business from IBM and others.
  • Enterprise Performance Managementis a $20 billion market that helps companies make better plans. Anaplan is taking customers from IBM, Oracle, and SAP in this business and in its fiscal year ending January 2017, Anaplan had $120 million in revenue, was growing at 75%.
  • Cloud securityis a $75 billion market that protects companies that operate in the cloud. Threat Stack intrusion detection platform for cloud, hybrid-cloud, and on-premise environments is taking share from IBM while growing at a 235% rate with expectations of expanding 350% its 2017 annual recurring revenue.

Here’s a sixth pica for IBM in the $27 billion market for application integration and middleware (AIM) software which Gartner says continues to grow faster than the overall infrastructure software market at 7%.

Girish Pancha – who earned a BS and MS in Electrical Engineering from Stanford and Penn respectively — left his role as Chief Product Officer at Informatica to found StreamSets in 2014 after “identifying a need in the market for data integration middleware, so enterprises could manage their data performance in the same way they use Application Performance Management (APM) and Network Product Management (NPM) to manage applications and networks.”

As Pancha explained in a September 29 interview, StreamSets — which started generating revenue in October 2015 — raised $20 million in a May 2017 Series B from Accel Partners, Battery Ventures, and New Enterprise Associates — and has doubled its head count in the past year from 35 to 70, mainly in the dev department with only two people leaving the company since 2014. While “headcount is growing at 50%, recurring revenue is soaring at 400%. I expect recurring revenue to rise 200% in 2018 while headcount will continue to rise at 50%,” says Pancha. 


Nuns With Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators

Lenders are awash in new regulations, and growing armies of rule enforcers are forcing striking changes on banks’ internal culturesnews

By  Kirsten Grind, The Wall Street Journal and Emily Glazer, The Wall Street Journal

Updated May 30, 2016 10:39 p.m. ET

SAN DIEGO—Among the new federal banking regulations there is one that financial wonks call “TRID,” the TILA-Respa Integrated Disclosure rule.

Attendees at a recent training school here for bank compliance staff, who must learn and enforce such rules, said they deciphered TRID’s true meaning: “The reason I drink.”

The sobering reality of banking in 2016 is that lenders are awash in new regulations, and growing armies of rule-interpreters and enforcers—for good or ill—are bringing striking changes to banks’ internal cultures.

The 2010 Dodd-Frank law, passed in the wake of the financial crisis and designed to prevent another, is one of the most complex pieces of legislation ever. At more than 22,200 pages of rules, it is equivalent to roughly 15 copies of “War and Peace” and covers matters from how much capital banks must set aside to how they can advertise.

Those rules and others have spawned a regulatory apparatus that is the fastest-growing component of the financial sector, with banks hiring tens of thousands of new staff whose job is to keep their employers right with the new regime. Federal agencies have dispatched thousands of their own minders to set watch at banks.

The regulatory tightening has helped change the profile of a big bank in the postcrisis era. It now looks more like a utility, subject to complex rules about how it can do business and answering to government watchers whose careers depend on enforcing those rules with vigor.

“The regulatory environment is completely different than it was five years ago,” said Greg Imm, chief compliance officer at M&T Bank Corp. MTB -1.22 % in Buffalo, N.Y., “and you can accept it and move on, or fight it and lose.”

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