2021 FINA 5260 - Lesson 3

FINA 5260
The Future of Financial Industry
Prof. Hilton Chan

Adjunct Professor, Finance Dept
School of Business and Management
Hong Kong University of Science & Technology
Class 3
Strategic use of Big data, IoT, open
banking APIs, and Time-series DBS
Copyright 2021 © Prof. Hilton Chan 2

Agenda
Future financial infrastructure for innovative services
1. Big Data
2. Sentiment Analysis
3. Open Innovation, Open Banking APIs
4. Cloud Computing
5. Copyright and Copyleft
6. Time Series DBS
7. IoT
8. Group Presentation – Banking APIs

Big Data → Business Strategy
(Problem Framing)

Traditional school of thought:
Business School vs Engineering School
Are you building the ship “right”?

Are you building the “right” ship?
Copyright 2021 © Dr. Hilton Chan 5
Banking is a Data, IT & Innovation business



Lifecycle of Information (Data Economy)
Market, Uncertainties
Human (ill-structured
data)
Raw Data
History
(Common
Knowledge) Intelligence
Knowledge News

Information Process (Data Economy)
Data Mining Data Collection
Data Data Collation

Dissemination
Data Analysis Data Cultivation

Data analytics begins with Problem Framing
Just business objective is

NOT good enough
Problem Framing
- Can you redefine

the problem?
- Give different
perspectives to
describe the
problem.
- Any innovative
way to address
the problem?

Problem Framing using Big Data
(Re-defining the problem)

Sentiment Analysis / Opinion Mining

Sentiment Analysis
Sentiment analysis is the process of determining the
emotional tone behind a series of words, graphics,
emojis used to gain an understanding of the
attitudes, opinions and emotions expressed by the
writers.
Sentiment analysis is extremely useful in social
media monitoring as it provides an overview of the
wider public opinion behind certain topics.

Sentiment Analysis
Intent Analysis
Analyzing the user’s intention behind a message and
identifying whether it is related to an opinion, news, marketing,
complaint, suggestion, appreciation or query.

Sentiment Analysis
Contextual Semantic Search (CSS)
It is important to understand what aspect of the brand is a
user discussing about and to plan responsive actions.
For example:
1. Amazon would want to segregate messages that related
to: late deliveries, billing issues, promotion related
queries, product reviews etc.
2. Starbucks would want to classify messages based on
whether they relate to staff behavior, new coffee flavors,
hygiene feedback, online orders, store name and location
etc.
Sentiment Analysis Engine
Conclusion
Sentiment = subjective, feeling
– Opinion
– Attitude
– Emotion
Deduced from
1. Key words (dictionary/lexical database)
– Semantic orientation and polarity of words
– Synonyms
2. Emoticons
3. Contextual semantic analysis (natural language)
Potential use or applications?
Traditional news poll vs. Social Media (big data) poll
1. Political campaign

US President Election – Clinton vs. Trump
Traditional news poll vs. Social Media (big data) poll

Cambridge Analytica
Cambridge Analytica (CA) is a privately held company that
combines data mining and data analysis with strategic
communication for the electoral process.
It was created in 2013 as an offshoot of its British parent

company SCL Group to participate in American politics.
In 2014, CA was involved in 44 U.S. political races. The

company is partly owned by the family of Robert Mercer,
an American hedge-fund manager who supports many
politically conservative causes.
Cambridge Analytica
In 2016, after Cruz's campaign had faltered, CA
worked for Donald Trump's presidential campaign, and
on the Leave EU-campaign for the United Kingdom's
withdrawal from the European Union.
https://www.desmog.co.uk/2018/03/21/web-power-how-cambridge-
analytica-sits-heart-brexit-trump-and-climate-science-denial
CA's role and impact on those campaigns has been

disputed and is the subject of ongoing criminal
investigations in both countries.

Let’s find out how Cambridge Analytics did it?
https://cambridgeanalytica.org/
Operation closed in 2018
Cambridge Analytica staff set up new firm

https://www.bbc.com/news/technology-44807093
https://www.auspex.ai/

Google Analytics
https://www.youtube.com/watch?v=uaaC57tcci0
video
How does this impact in today’s financial industry?
FinTech?
Fake news vs true news - which spreads faster?

Positive sentiment vs Negative sentiment – which
impact the market faster?
…… Any other observations?
Any other use?

2. Brandwatch analytics, e.g. iOS vs
Android
3. Policy making (consultation)
4. Post-sales analysis

BIDT model
“Data”, “Technology” and “Innovative Integration”
Can you see how they impact on business?
Market
Business Assessment
(ideas & models)
(Consumers)
Innovative New FinTech

Integration Applications
Technology Data
(computing & (analytics and
communication) management)

Art of War, Sun Tze
Thus, what enables the wise sovereign and the good

general to strike and conquer, and achieve things
beyond the reach of ordinary men, is
FOREKNOWLEDGE.
Now this foreknowledge cannot be elicited from
spirits; it cannot be obtained inductively from
experience, nor by any deductive calculation.
Knowledge of the enemy's dispositions can only be
obtained from other men.

Contextual Semantic Search - UBER
Analysis the online discussions about Uber re.
“cancel”, “payment”, “price”, “safety” and
“service”:-
1. Facebook: 34,173 Comments

2. Twitter: 21,603 Tweets
3. News: 4,245 Articles


Intent analysis - UBER
For the positive comments, we can do an intent analysis to
determine if they are random content, news shares, marketing
and promotional content and spam/junk/unrelated content.

After content analysis, we can remove all such irrelevant intent
categories and reproduced the result:
You can see the significant drop in the positive comments, especially
in the “price” related comments. Plan your responsive actions!!!
An example of Sentimental Analysis Engine
https://towardsdatascience.com/sentiment-analysis-concept-analysis-and-
applications-6c94d6f58c17
ParallelDots AI APIs, is a Deep Learning powered web

service by ParallelDots Inc, that can comprehend a
huge amount of unstructured text and visual content
to empower your products. You can check out some
of our text analysis APIs and reach out to us by filling
this form here or write to us at
apis@paralleldots.com.

An example of Sentimental Analysis Engine
Try this out:
https://www.paralleldots.com/text-analysis-apis
Let’s randomly pick a few articles from the web and analyze them:
A second Canadian plane carrying 185 passengers from China’s Hubei province,
which has been in lockdown during the novel coronavirus outbreak, has landed
at Canada’s largest armed forces base in southern Ontario.
A Belfast couple on Tuesday made history by becoming the first same-sex

couple to get married in Northern Ireland, following a landmark change in the
law last year.

Open Innovation, Open Banking APIs

What is an API?
File (Data) transfer using floppy disks, USB drives, etc.
EDI (Electronic Data Interchange) replaces physical means to

transfer large volume of data between computer to
computer (batch mode); e.g. floppy disks, emails, electronic
communication, etc.
API (Application Programming Interface) is a communication

protocol, including data exchange, between computer
software to computer software.
Connectivity and
Communication at “real time”!
Open Concept →
Innovation, Collaboration, Competition
Quick review:-
1. Shareware, Freeware
2. Cryptography (open algorithm) → Confidentiality
3. OSI (Open Source Intelligence) / Big Data
4. Open IT architecture / Internet / World Wide Web
5. Social media network / Sentiment analysis
6. IoT (Internet of Things)
Further study:
7. Open Innovation Strategy
8. APIs (open connectivity) / Open Banking APIs
9. Copyleft (IPR)

Innovation – Open, Collaboration, Frugal
Open Innovation
https://www.youtube.com/watch?v=A8Bp-WEndww
Video-intro
former Chairman and CEO P&G

https://www.youtube.com/watch?v=_7mMToRlAxs
Video- P&G Video-Honda
Frugal Innovation
https://www.ted.com/talks/navi_radjou_creative_proble
m_solving_in_the_face_of_extreme_limits#t-80786
Video-frugal Inno

Why offering APIs?
As you have tried using this:
https://www.paralleldots.com/text-analysis-apis
Class discussion
Why offering APIs?
What advantages can Paralleldots’ API bring you?

Why offering APIs?
1. “White label”
– IaaS, PaaS or SaaS
2. Build another filter or algorithm
3. Integrate ParallelDots’ Deep Learning
algorithm and outputs as inputs with other
Sentiment analysis engine(s), and provide a
new sentiment analysis capabilities.
Connectivity and
Communication at “real time”!
BIDT model
Let’s look at API “Technology” and “Innovative Integration”
impact on Business.
Market
Business Assessment
(ideas & models)
(Consumers)

Technology Data

Open Banking APIs (UK)
• In 2016, by the Competition & Markets Authority and the UK’s
nine largest providers of personal and business current
accounts to change the market for retail banking forever.
• Open Banking enables you, or your company, to give companies
access to your accounts so that they can provide new products
and services to help you securely move, manage and make
money available more easily and efficiently.
• That means that you are in control, your accounts and your
data are secure and you can be assured that the companies you
deal with are regulated by the Financial Conduct Authority or
the National Competent Authority.
• Roll out on Jan 13, 2018.

Open Banking APIs - IBM
Open banking is a term that is associated with a broad set of initiatives that align to one
of these three principles:
Banking customers are empowered as the owners of their financial data.
Customer data has been traditionally locked in banks’ IT systems, but this practice is
changing. Regulations, such as Payment Services Directive (PSD2), are forcing banks to
“open up”, enabling customers to easily share data with third parties.
Banking products are transparent and easy to compare.
You can understand and compare products only if they are described in a consistent way
and the information is easy to access. The first phase of the UK Open Banking initiative is
an example of initiatives that are targeting this space.
Multiple parties work together to create new value chains to produce better products
and services.
A traditional retail bank has its own distribution channels (such as branches, contact
centers, and digital channels). It also creates its own products and has its own back-
office operations. The emergence of financial technology (fintech) and the push of
regulators for more competition are disaggregating and open this closed value chain. In
a world of open banking, participants can specialize in one or more sub-steps of the end-
to-end process. They can focus on areas that have a clear competitive advantage and
leverage the scale and efficiency that partnerships with other players enable.
In this post, I describe why Open Banking APIs are important, how they are being used,
and what they can mean to yourCopyright 2021 © Prof. Hilton Chan
business. 42
Open Banking APIs (UK)
See examples in the OB document (p. 10 – 15)
HSBC APIs
https://developer.hsbc.com/
Read this:
http://theconversation.com/open-banking-the-invisible-
reform-that-will-shake-up-uk-financial-services-89939

Open Banking APIs – HK and Singapore
Hong Kong
http://www.hkma.gov.hk/eng/key-information/press-
releases/2017/20170929-3.shtml
Consultation paper
Singapore
https://www.smartnation.sg/resources/open-data
https://bankinnovation.net/2017/11/singapores-dbs-bank-
launches-worlds-largest-api-platform/

Open Banking APIs (HK) – Phase 1




Stocks, Futures & Options Exchanges
around the world
HK Stocks Exchange APIs
https://www.hkex.com.hk/Services/Market-Data-Services/Real-
Time-Data-Services/Data-Licensing?sc_lang=en
https://www.hkex.com.hk/Services/Market-Data-Services/Real-
Time-Data-Services/Testing-Services?sc_lang=en
CME (Chicago Mercantile Exchange) APIs

http://www.cmegroup.com/clearport/clearport-api.html
https://www.cmegroup.com/confluence/display/EPICSANDBOX/M
argin+Service+API

“BITD” model and the FinTech value chain
What is the impact?
Sentiment Analysis
Market Google Analytics
Business Assessment
AB Testing
Psychometrics Open Banking
(ideas & models)
(Consumers) APIs

Technology Data

Cloud Computing
SaaS, PaaS, IaaS

Cloud Computing
Cloud computing, also on-demand computing, is a kind of Internet-
based computing that provides shared processing resources and data to
computers and other devices on demand (pay-for-use). It is a model for
enabling ubiquitous, on-demand access to a shared pool of configurable
computing resources.
- Software as a service (SAAS)
- Platform as a service(Paas)
- Infrastructure as a service(Iaas)
(https://en.wikipedia.org/wiki/Cloud_computing)
Cloud Computing Service Model

“BITD” model and the FinTech value chain
What is the impact?
Sentiment Analysis
Market Google Analytics
Business Assessment AB Testing
Psychometrics Open Banking
(ideas & models)
(Consumers) APIs

Technology Data Cloud

(computing & (analytics and Computing

Nio - BaaS

Copyright and Copyleft
Intellectual Property Right (IPR)

Open Source Intelligence (OSI)
1. Data
2. Record
3. Knowledge
4. Fore-knowledge (foresight / hindsight)
5. Intelligence
6. Wisdom

Open vs. Proprietary
Open source intelligence/database >> Proprietary
intelligence / databases
Open source software >> Proprietary software
Paradigm shift in information strategy

(disruptive changes) !!!

Corporate data mining examples
Credit Card
Fraud – irregular spending pattern; pattern
recognition of fraudulent transactions/shops
ERP
Early identification of bad debts
Inventory system
Seasonal change re. stock items, e.g. weather and
drinks
Correlation of items for sales & promotion, e.g.
beer/soft drinks and chips
Open Source IP (intellectual property)
Copyright
Copyleft
https://www.youtube.com/watch?v=6Xky8HTqaZo
How is copyleft different from copyright?

Relational DBS vs. Time Series DBS

Velocity of Big Data – real time streaming
Very often the issue with big data velocity

is the I/O time with the DBS.

Relational Database (RDB)
• A RDB is storage and retrieval of records in tables
with rows and columns.
• A table is referred to as an Entity or Relationship
with a collection of objects of the same type
(rows).
• Data in a table can be related according to
common keys or concepts.
To record and retrieve records in RDB, it would be

very slow to normalize / join tables.
Time-series Database (TSDB)
There are many applications which requires real-
time streaming of data into the system for
storage and analysis:-
Any example ???

Real-time streaming of data into DBS
Flight data in the black box

Weather data

Telecommunication networks
Data & API

Management

Financial “tick” data (i.e. bid, ask, closed) in the market

High Frequency Trading – Market Making
Scalability – multiple instruments
Availability – continuous quoting
https://www.quantinsti.com/blog/automated-market-making-overview
Algo Trading
Descriptive → Predictive → Prescriptive Analytics

Monthly data, Daily data, Hourly data, Minute data,
……, More data?
Algo Trading
Descriptive → Predictive → Prescriptive Analytics

Monthly data, Daily data, Hourly data, Minute data,
……, More data? Tick data, ……., Bid-Ask data
TSDB collects the exact time at which a critical parameter
was measured or a particular event occurred that can
have big impact on the outcome.
Measurements would not be revised or updated once
recorded.
Use:
Analysis & Prediction
Machine Learning
(daily, monthly,
time-series pattern)
What is the business implication of TSDB?
Examples,
Mongo DB
No SQL
KDB
OneTick

Conclusion
1. Shareware, Freeware
2. Cryptography (open algorithm) → Problem Framing
Confidentiality - Can you redefine
the problem?
3. OSI (Open Source Intelligence) / Big Data - Give different
4. Open IT architecture / Internet / World Wide perspectives to
describe the
Web problem.
- Any innovative
5. IoT (Internet of Things) way to address
6. Social media network / Sentiment analysis the problem?
7. Open Innovation Strategy (Frugal,

Collaboration & Competition)
8. APIs (open connectivity) / Open Banking APIs
9. Copyleft (IPR)

Q&A

Business Cases
(Food for Thought)

Business Case 1 - Starbucks
• Starbucks was introducing a new coffee product but was
concerned that customers would find its taste too strong.
• The morning that the coffee was rolled out, Starbucks monitored
blogs, Twitter, and niche coffee forum discussion groups to assess
customers’ reactions. By mid-morning, Starbucks discovered that
although people liked the taste of the coffee, they thought that it
was too expensive. Starbucks lowered the price, and by the end of
the day all of the negative comments had disappeared.
• Compare this fast response with a more traditional approach of
waiting for the sales reports to come in and noticing that sales are
disappointing. A next step might be to run a focus group to
discover why. Perhaps in several weeks
• Starbucks would have discovered the reason and responded by
lowering the price
(“Tutorial: Big Data Analytics: Concepts, Technologies, and Applications” Hugh J. Watson May 2014)

Business Case 1 - Starbucks Can you
design and
• Starbucks was introducing a new coffee product but was framing this
concerned that customers would find its taste too strong. problem?
• The morning that the coffee was rolled out, Starbucks monitored
blogs, Twitter, and niche coffee forum discussion groups to assess
customers’ reactions. By mid-morning, Starbucks discovered that
although people liked the taste of the coffee, they thought that it
was too expensive. Starbucks lowered the price, and by the end of
the day all of the negative comments had disappeared.
• Compare this fast response with a more traditional approach of
waiting for the sales reports to come in and noticing that sales are
disappointing. A next step might be to run a focus group to
discover why. Perhaps in several weeks
• Starbucks would have discovered the reason and responded by
lowering the price

Business Case 2 – U.S. Xpress
• U.S. Xpress is a transportation company. Its cabs continuously
stream more than 900 pieces of data related to the condition of
the trucks and their locations [Watson and Leonard, 2011].
• This data is stored in the cloud and analyzed in various ways,
with information delivered to various users, from drivers to
senior executives, on iPads and other tablet computers.
• For example, when a sensor shows that a truck is low on fuel,
the driver is directed to a filling station where the price is low. If
a truck appears to need maintenance, drivers are sent to a
specific service depot.
• Routes and destinations are changed to ensure that orders are
delivered on time.

Business Case 3 – Target Store
• Target received considerable negative attention in
publications such as the New York Times [Duhigg, 2012]
and Forbes [Hill, 2012] for mining data to identify women
who are pregnant.
• The negative press began when a father complained to a
Target store manager in Minneapolis that his daughter had
received pregnancy-related coupons.
• He felt that the coupons were inappropriate and promoted
teen pregnancy. Little did he know that his daughter was
pregnant. He later apologized to the store manager and
said that there had obviously been some activities going
on in his household of which he was unaware

Business Case 3 (con’t) – Target Store
How did Target identify pregnant women?
• Target focused on women who had signed up for the baby registry. They
then compared the women’s purchasing behavior with the purchasing
behavior of all Target customers.
• Twenty-five variables were found useful for identifying this market
segment—pregnant women—and when their babies were due. The
variables included buying large quantities of unscented lotions; supplements
such as calcium, magnesium, and zinc; scent-free soaps; extra large bags of
cotton balls; hand sanitizers; and washcloths.
• Using these variables, pregnancy predictive models were built and used to
score the likelihood that a woman was pregnant and when she was likely to
deliver.
• For example, pregnant women tend to buy hand sanitizers and washcloths
as they get close to their delivery date.
• Target used these predictions to identify which women should receive
specific coupons.

More Cases …..
1. Ikea
2. Google
3. Airport Security
Give some examples how Big Data can provide

competitive advantages.
Increase revenues?
Reduce operation costs?

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FINA 5260

The Future of Financial Industry

Prof. Hilton Chan

Copyright 2021 © Prof. Hilton Chan 2

Copyright 2021 © Prof. Hilton Chan 3

Copyright 2021 © Prof. Hilton Chan 4

Are you building the ship “right”?

Copyright 2021 © Dr. Hilton Chan 6

Copyright 2021 © Dr. Hilton Chan 7

Copyright 2021 © Dr. Hilton Chan 8

Copyright 2021 © Dr. Hilton Chan 9

Data Mining Data Collection

Data Data Collation

Data Analysis Data Cultivation

Copyright 2021 © Dr. Hilton Chan 10

Just business objective is

- Can you redefine

Copyright 2021 © Dr. Hilton Chan 11

Copyright 2021 © Prof. Hilton Chan 12

Copyright 2021 © Prof. Hilton Chan 13

Copyright 2021 © Prof. Hilton Chan 14

Copyright 2021 © Prof. Hilton Chan 15

Copyright 2021 © Prof. Hilton Chan 18

Copyright 2021 © Prof. Hilton Chan 19

It was created in 2013 as an offshoot of its British parent

In 2014, CA was involved in 44 U.S. political races. The

CA's role and impact on those campaigns has been

Copyright 2021 © Prof. Hilton Chan 21

Operation closed in 2018

Cambridge Analytica staff set up new firm

Copyright 2021 © Prof. Hilton Chan 22

Fake news vs true news - which spreads faster?

Copyright 2021 © Prof. Hilton Chan 24

Copyright 2021 © Prof. Hilton Chan 25

Innovative New FinTech

Copyright 2021 © Prof. Hilton Chan 26

Thus, what enables the wise sovereign and the good

Copyright 2021 © Prof. Hilton Chan 27

1. Facebook: 34,173 Comments

Copyright 2021 © Prof. Hilton Chan 28

Copyright 2021 © Prof. Hilton Chan 29

Copyright 2021 © Prof. Hilton Chan 30

ParallelDots AI APIs, is a Deep Learning powered web

Copyright 2021 © Prof. Hilton Chan 32

A Belfast couple on Tuesday made history by becoming the first same-sex

Copyright 2021 © Prof. Hilton Chan 33

Copyright 2021 © Prof. Hilton Chan 34

EDI (Electronic Data Interchange) replaces physical means to

API (Application Programming Interface) is a communication

Copyright 2021 © Prof. Hilton Chan 36

former Chairman and CEO P&G

Copyright 2021 © Prof. Hilton Chan 37

Copyright 2021 © Prof. Hilton Chan 38

Innovative New FinTech

Copyright 2021 © Prof. Hilton Chan 40

Copyright 2021 © Prof. Hilton Chan 41

Copyright 2021 © Prof. Hilton Chan 43

Copyright 2021 © Prof. Hilton Chan 44

Copyright 2021 © Prof. Hilton Chan 45