Trading Tomorrow - Navigating Trends in Capital Markets

The Rise of Privacy Enhancing Technologies in Capital Markets

• Numerix • Season 5

Share episode

As financial institutions become more data-driven, one of their biggest challenges is finding ways to collaborate and innovate without exposing sensitive information. Privacy enhancing technologies, known as PETs, are emerging as a potential solution, enabling banks and market participants to analyze, share, and enrich data while maintaining strict privacy and regulatory requirements.

In this episode of Trading Tomorrow – Navigating Trends in Capital Markets, host Jim Jockle speaks with Ronen Cohen, Vice President of Strategy at Duality Technologies, about how PETs are being used across compliance, fraud detection, financial crime investigations, and market analytics.

Jim Jockle:

Welcome to Trading Tomorrow, Navigating Trends in Capital Markets, the podcast where we deep dive into technologies reshaping the world of capital markets. I'm your host, Jim Jocal, a veteran of the finance industry with a passion for the complexities of financial technologies and market trends. In each episode, we'll explore the cutting-edge trends, tools, and strategies driving today's financial landscapes and paving the way for the future. With the finance industry at a pivotal point, influenced by groundbreaking innovations, it's more crucial than ever to understand how these technological advancements interact with market dynamics. As financial institutions become increasingly data-driven, one of the biggest challenges is collaborating and innovating without exposing sensitive information. Privacy enhancing technologies, or pets, have emerged as one potential solution to this challenge. By letting firms analyze and share data securely across jurisdictions, pets are being explored for compliance, fraud protection, and market analytics. To help us unpack how this technology is being put into practice, we're joined by Rowan Conan, Vice President of Strategy at Duality Technology, where he leads Global Strategy and oversees the company's UK business. Ronan has spent his career at the intersection of FinTech, RegTech, and Data Collaboration. Before joining Duality, he led product marketing at Data Miner, helping advance real-time analytics across the public and private sectors. He's also held senior roles in financial crimes technology and compliance innovation, and even founded a personal lending company. With his background in financial data, regulation, and emerging analytics, Ronan offers a unique view into how pets are shaping the next phase of secure financial innovation. So what do you see as the biggest adoption hurdles uh facing institutions at this point? Is it technical, is it regulatory, or probably cultural?

Ronen Cohen :

I think culture is definitely far and away number one. Uh and the second one, actually, I think is awareness. Uh technology is really the smallest piece of the puzzle here. Um from you know a culture perspective, I think regulators are creating avenues for collaboration and for the use of privacy technologies. Um but you know, culture and getting out of the status quo, and particularly aligning culture across the different organizations that want to collaborate are the hardest pieces of the puzzle here. Uh, and why it's so critical to have a leadership buy-in. From an awareness perspective, you know, pets solve problems that have been around for so long and are so culturally ingrained that people aren't necessarily looking for these solutions. You know, historically, the way that this has been solved is getting a bunch of lawyers in a room for a really, really long time to hash things out. And that's still largely the way things are done today. And and privacy technologies offer a paradigm shift and making people aware that they can actually solve these challenges in a different way and scale it up in a really quick way with all of you know the security and regulatory privacy buy-in is really a big obstacle.

Jim Jockle:

Nothing good ever happens when a whole bunch of lawyers get in a room. Um so how do pets fit into the broader push for responsible or explainable AI and finance?

Ronen Cohen :

They fit really well into that concept. I mean, it to the point that even NIST has included um the privacy enhanced in the definition of the term uh for responsible and trustworthy AI. Uh and we see other government and industry groups following them and encouraging the use of privacy technologies for this because they help you increase access to data to ensure more diversity, to help with you know fairness and bias, um, because they help ensure accountability and security. And they do that without impacting explainability at all.

Jim Jockle:

So collaboration between banks is becoming more and more common, uh especially around fighting fraud and financial crime. How how do pets make that possible?

Ronen Cohen :

Sure. Uh so you know, I'll I'll take it sort of in in in in the reverse. Why has it not been possible? Well, it hasn't been possible because collaboration involves a level of trust, maybe with your competitors. It involves using sensitive business data, it involves using sensitive personal data. And so that makes the obstacles around legal and compliance and IT and even the business really, really challenging. Uh and so it's becoming more common now to do this because privacy technologies reduce those obstacles. Um, you're actually seeing privacy technologies being used across the entire cycle of financial crime, for instance, and building models, investigating, even collaborating with law enforcement because you're able to have the privacy, the security, and the governance built in and sort of again set it and forget it in that sense.

Jim Jockle:

And so from a policy standpoint, how do you see regulators approaching pets in the next few years? Do you think they're gonna be looking as optional tools or as a standard part of a compliance framework?

Ronen Cohen :

You know, I think generally uh regulators don't really like to prescribe specific technical solutions, but at the same time, they want to create avenues for collaboration and still, you know, enforce that you're uh uh ensuring and preserving privacy and security. So I think that they're signaling widely that privacy technologies are integral to compliance and not a nice to have. Um, and so I think over the next few years, I at least expect regulators to embed these expectations directly even into you know supervisory guidance and audits and really making it a core part of how firms can demonstrate compliance while still you know supporting their shareholders and their other obligations.

Jim Jockle:

And looking ahead, how might pets change how capital markets handle data, analytics, and and ultimately trust?

Ronen Cohen :

Sure. I mean, you know, in capital markets, you know, I think data is only valuable in so much as what you could do with it to extract value and make better decisions, right? So, you know, privacy technologies contribute a value add layer on top of this data. Uh, they open up new possibilities for data enrichment using data that's locked away, or developing better models while protecting IP and strategy. Or even, you know, I think a trend that that's coming now is commercializing these new data sets that are not used today because of these business concerns. Um, and that's not even to mention, you know, the regulatory benefits of enabling trust and transparency and so on.

Jim Jockle:

So, Ronald, unfortunately, we've made it to the final question of the podcast. We call it the trend drop. It's like a desert island question. And if you could only watch one trend in fintech over the next few years, what would that trend be?

Ronen Cohen :

I would say for me, it's it's how sensitive data and models are gonna get commercialized. Um, you know, plenty of industry leaders and people across academia have raised the flag that all of the high quality data used to train AI models is running out. And that means that the best data is gonna be held behind corporate firewalls. And it will only be unlocked if the owners of that data can guarantee a high level of privacy and security around their data and around their IP. And there's obviously a massive economic incentive to do so. Like, you know, imagine if OpenAI or any other gen AI provider could access sensitive fintech data. I think they pay a lot of money for that. Um, so I think for me, that's the area to track, right? How this data gets unlocked and used, and how you know uh privacy technologies become the enabler to that, basically.

Jim Jockle:

Give us a lot to think about there, Ronan. Thank you. Appreciate your time today.

Ronen Cohen :

Thanks.

Jim Jockle:

We'll see you next time.