Pradeep Bhatia is CEO and Co-founder at Derivative Path.
What trends are getting underway that people may not know about but will be important?
Capital markets are becoming more democratized and more accessible. Obviously, we see this through mainstream media reporting on cryptocurrency and DeFi for consumers. The most obvious parallel we see is with international payments for commercial customers in the financial institutions’ space. Nearly $6trn dollars of goods were imported or exported in the US this year per the Bureau of Economic Analysis. Historically, for community and regional financial institutions, any solution to assist with these transactions was set up years ago for accommodation purposes only and stowed in back office operations. The value of the opportunity given up to larger correspondent banks and the impact on the customer experience were not of primary concern. Today, technology is allowing financial institutions to take control of international payments for pricing and service. We’ve had more conversations on how our solutions can enable this in the past 6 months than ever before.
What are your customer’s pain points and how have they changed from 1 year ago?
The vast majority of financial institutions we work with are looking for ways to grow commercial loans and generate additional fee income. The need to do so has only increased in the past year. In particular, PPP loan paydowns this year will result in lower interest income next year. Further, PPP origination fees received in prior years need to be replaced somehow going forward. We provide financial institutions with both the technology and the expertise to either begin, or enhance, a commercial loan hedging program. Offering such a solution can enable banks to compete with others for these loans, reduce duration in the loan book, and generate additional fee income. Our technology can reduce both the cost and the operational needs to administer a successful program compared with others. Deploying solutions to solve for both loan and fee income growth should take priority in 2022.
How is your target market leveraging technology to improve their workflows and productivity?
We believe the longer it takes to embrace technology, the more difficult the eventual transition will be. Institutions need to continuously assess the technology, if any, backing their derivatives program. Prior to our inception, there were really no purpose-built, cloud-based technology platforms for derivatives made for community and regional financial institutions. We can now help these firms access capital markets and improve market transparency, often for the first time. For those larger banks with existing customer derivatives books, the importance of effective sales enablement and the need for greater operational efficiency continues to grow. Those using our platform can generate customer presentation material and dealer term sheets with the click of a button, improving time to market. They also leverage our robust technology to manage customer notices and create internal reports, reducing time spent on operations and finance. Improving workflows and productivity will continue to be themes we see in 2022 and beyond.
