DIGFIN,Published on April 14, 2020 ，an arm of Hangzhou-based technology company HengTian, plans to launch a Software-as-a-Service platform for financial institutions and other enterprises in the West. It’s an example of how Chinese technology, originally developed for the mainland market, can be packaged and exported to banks in other parts of the world…with a little help from Western backers. Patrick Horgan, managing director for Europe at Hengtian, who is based in Cork, Ireland, says the SaaS business is now in minimum-viable-product mode with some beta users in Europe and the U.S., and it will then take this to customers in Asia Pacific. But it is using many of the technologies developed by HengTian, which itself is a joint venture between Boston-based custodian bank State Street, Zhejiang University, and another Hanghzou software company, Insigma Technology. Hengtian is the brand name that HengTian trades under in the West.
Changing client demands
State Street was both an investor and an early client, using its relationship with Zhejiang University to get a source of young engineering talent (a relationship State Street has copied with Ireland’s University College Cork). Then the company began landing contracts at big domestic institutions, such as Agricultural Bank of China. It opened an office in Boston in 2009 and went live in Cork last year. The move to add a SaaS component to the company’s more bespoke I.T. work for banks reflects in part the changing nature of what clients need and what Hengtian can commercialize at a product level. A lot of its earliest work has involved reengineering banks’ I.T. departments. For example, it developed a way to shift a bank’s core systems from being written in old computer languages such as COBOL into newer, more flexible ones like Java. Initially it did so manually but has since written software to automate the transition. Now it is doing more with machine learning to help deliver anti-fraud and anti-money laundering services.
“AML and KYC are not the sexiest areas in emerging technology, but it’s an enormous problem and existing solutions are costly to operate,” Horgan said. One barrier to adoption of cutting-edge artificial intelligence by banks is their preference for rules-based, tick-the-box software that their internal compliance departments can approve. This remains the case but Horgan says some banks are becoming more receptive to the use of machine learning in the process, to enable computers to adjust how they look for fraud signals as data sets change.
Made in China
China has been the testbed for these tools. “They have lots of transactions,” Horgan said. “Learning requires a lot of data.” China remains the source of many of the company’s innovations, partly because financial institutions there already experienced losing consumers to the likes of Ant Financial and need to move quickly to secure their corporate clients. China ZheShang Bank, also based in Hangzhou, helped pioneer a blockchain solution for supply-chain finance that HengTian helped it build on the Hyperchain protocol, where buyers and sellers of account receivables trade, which increases working capital for small businesses and gives treasurers and financial institutions a new asset class. CZB’s platform has now processed about $25 billion worth of transactions since it went live in 2017. “That’s something we can replicate in Europe, where there is an increasing volume of supply-chain financings,” he said.