The Rensselaer Polytechnic Institute in Troy, New York and the Stevens Institute of Technology in New Jersey received a grant from the National Science Foundation to establish a research center in financial science and technology. The Research Center for the Advancement of FinTech, or CRAFT, is expected to receive $ 1 million in funding in its first year, including $ 300,000 from NSF per year over five years.
The rest will be funded by members of the industry. The goal is to expand the center to include more schools, with Albany Law School among those expressing interest. Jim Levulis of WAMC spoke with Aparna Gupta, professor of quantitative finance at RPI and co-director of CRAFT.
Gupta: As its name suggests, this is a center dedicated to the advancement of financial technologies and to supporting the industry in its innovation needs around financial technologies. This is therefore the main objective of the center.
Levulis: And I understand that among those first areas of interest will be cybersecurity. How can this center, which focuses 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 of Albany when is it cybersecurity? How will this center perhaps examine it from a different perspective?
Gupta: So cybersecurity is one of the many trusts. The scope of the center is a bit wider than cybersecurity. Cybersecurity is becoming in a way the side effect of the fundamental dependence on digital assets, digital technologies, the digitization of the very delivery of financial services. Thus, the main focus of the center will be on how the digitization and use of data, the various ways in which data transforms the creation of financial services, will be the main focus of the center, around of course the machine. learning, AI and how data combined with these computing technologies will transform business models, as well as the way customers engage with financial services. So cybersecurity is then a side effect of engaging people through cybersystems, rather than the traditional model of in-person or paper-based engagement, and then it creates failures and weaknesses through which vulnerabilities emerging. In that sense, then, it’s a pretty broad spectrum of how technologies are transforming financial services. And cybersecurity, of course, is one of them, and that would be the distinguishing factor.
Levulis: And you mentioned a company that is moving more towards the digital sphere. And now currency, of course, is entering the digital sphere, as in the case of Bitcoin. Does this movement, this trend, open more vulnerabilities for the financial sector and just for the everyday individual?
Gupta: Absolutely, it is. Not only creating more vulnerabilities, but also, as I said, creating new business models and in general, what people would call a democratization of finance, in peer-to-peer engagement, whether through the through blockchain systems or general peer-to-peer systems in crowdfunding models. Thus, in such a democratic peer-to-peer system, there are many modes or new modes of vulnerabilities. Because the weakest link defines the weakness of the system. It would therefore be the central pillar through which vulnerabilities emerge and continue to be challenged.
Levulis: And what do you think of this cybersecurity insurance idea for businesses. Is this a worthwhile effort that is more about protecting against an inevitable attack than, you know, just strengthening the defenses?
Gupta: Cyber security insurance is certainly a very hot and emerging field, but I think there would be a lot of challenges, even in the sense of being able to quantify and price such risks. So basically, you know, being able to create economically viable products around cybersecurity insurance or cyber insurance in general. So of course we have engaged with people who support this area of development. It would therefore be a field of research to allow the innovation of solutions for cyber insurance. So this is a very important area. But it is also a very difficult area, as the threats themselves evolve. And be able to assess the risks around the threats. And then designing insurance service contracts that are economically viable is the whole spectrum of challenges. Again, very data hungry. And of course, the ability to collect industry-wide data to be able to come up with meaningful solutions will be a challenge. It is therefore certainly a matter of concern to study.
Levulis: And now, coming back to this new center between RPI and the Stevens Institute of Technology, I understand that 18 financial services organizations have pledged their support for this effort. Can you detail what some of these organizations are and, if so, what they will bring to the work of the center?
Gupta: So yes, there are 18 and there are others that we are talking to. But at this point, their formal engagement with the center is still ongoing. They have a commitment. But of course, they will indeed become members of the center. And this is the process that is underway. So until this is finalized, I am not allowed to release their names. But to give an idea, it’s the biggest banks, well-known consulting firms, tech companies, biggest tech companies, also really spanning the spectrum of companies from finance to tech that of course engage them. with each other to create technological advancements in the financial services industry. And the nature of their engagement, as the very definition of this type of center, is that they will become a guiding element of where the center develops its research agenda. Thus, these industrial members of the center will form the central entity which defines or helps to define the very spectrum of research projects on which the center will devote its resources. So that’s a very critical role that industry supporters play, of course, providing resources to the center and then, of course, guiding how research is conducted by the center. And then of course, the structure is designed in such a way that the problems dealt with by the center are the ones that concern all companies. So really something that is a challenge for the whole industry, and therefore solving them would have a very broad impact in addressing the challenges that the whole industry is facing. Thus, this collective community that the center will become is the main framework for the design of the center.