Rensselaer Polytechnic Institute in Troy, New York and the Stevens Institute of Technology in New Jersey have been awarded a National Science Foundation grant to create a research center on financial technology and science. The Center for Research toward Advancing Financial Technologies, or CRAFT, is expected to receive $1 million in funding in its first year, with $300,000 from the NSF annually over five years.
The rest will be funded by industry members. The aim is expand the center to include more schools, with Albany Law School among those expressing interest. WAMC's Jim Levulis spoke with Aparna Gupta, a professor of quantitative finance at RPI and co-director of CRAFT.
Gupta: So as the name suggests, this is a center devoted to advancing financial technologies and supporting industry in their needs for innovation around financial technologies. So that is the primary focus of the center.
Levulis: And I understand that among those initial areas of focus will be cybersecurity. How might this center, which has a focus on the financial sector as you just mentioned, differ from the work of other institutions such as the College of Emergency Preparedness, Homeland Security and Cybersecurity at the University at Albany when considering cybersecurity? How will this center look at it maybe with a different perspective?
Gupta: So cybersecurity is one of the several trusts. The scope of the center is a little bit broader than cybersecurity. Cybersecurity kind of becomes the side effect of the core dependence on digital assets, digital technologies, digitization of the very delivery of financial services. So the core emphasis of the center is going to be around how digitization and data usage, the varieties of ways by which data is transforming how financial services is getting created, is going to be the primary focus of the center, around of course, machine learning, AI and how data combined with those computational technologies are going to transform business models, as well as how customers engage with financial services. So cybersecurity happens to then be a side effect of how much people engage through cyber systems, rather than the traditional model of in-person engagement or paper-based engagement, and then that, that creating failures and weaknesses by which vulnerabilities emerge. So in that sense, it is a pretty broad spectrum of how technologies are transforming financial services. And cybersecurity, of course, is part of that, and that would be the distinguishing factor.
Levulis: And you talked about business moving more into the digital sphere. And now currency, of course, is moving into the digital sphere, such as the case of Bitcoin. Is that move, that trend, opening up more vulnerabilities for the financial sector and just for the everyday individual?
Gupta: Absolutely, it is. Not just create more vulnerabilities, but also, as I was saying, creating new business models and in general, what people would call as democratization of finance, in peer-to-peer engagement, whether through blockchain systems or general peer-to-peer systems in crowd funding models. So in any such peer-to-peer democratic system, there are many modes or new modes of vulnerabilities. Because the weakest link defines how weak the system is. So that would be the very central pillar by which vulnerabilities will emerge and continue to challenge.
Levulis: And what do you make of this idea of cybersecurity insurance for companies. Is that a worthwhile effort going more towards protecting against an inevitable attack versus, you know, just shoring up the defenses?
Gupta: Cybersecurity insurance is definitely a very hot and emerging space, but I think it would have a lot of challenges even in the sense of being able to quantify and price such risks. So essentially, you know, being able to create economically viable products around cybersecurity insurance or cyber insurance in general. So, we have, of course, engaged with individuals who support this area of development. And so it would be an area of research in enabling solution innovation for cyber insurance. So it is a very important area. But it's also a very challenging area, because the threats itself are evolving. And being able to assess the risks around the threats. And then designing insurance services slash contracts that are economically viable, is the whole spectrum of challenges. Again, very hungry of data. And of course, the ability to collect industry wide data to be able to make meaningful solutions is going to be a challenge. So that's definitely a matter of concern to study.
Levulis: And now moving back to this new center between RPI and the Stevens Institute of Technology, I understand that 18 financial services organizations have pledged their support to this effort. Are you able to detail what some of those organizations are, and if so what they will bring to the work of the center?
Gupta: So yeah there are 18 and there are more that we are in conversations with. But at this point, their formal engagement with the center is still in the works. They have a commitment. But of course, they will actually become members of the center. And that's the process that's under work. So until that is finalized, I'm not at liberty to disclose their names. But to just give a sense they are the largest banks, very well-known consulting companies, technology companies, the largest technology companies, also really covering the spectrum of companies from finance to technology that engage of course with each other in creating technological progressions of the financial services sector. And the nature of their engagement, as the very definition of this kind of center is that they will become a guiding element of where the center develops its research agenda by. So these industry members of the center will form the core entity that defines or helps define the very spectrum of research projects the center will devote its resources on. So it's a very critical role the industry supporters play in of course, providing resources to the center and then of course, guiding how the research is conducted by the center. And then of course, the structure is designed so that the issues that the center addresses are those that are a concern across companies. So really something that is a challenge to the entire industry, and therefore solving them would have a very broad impact by addressing challenges that the entire industry is contending with. So that collective community that the center will become is the primary design framework of the center.