Financial technologist Marvin Chang joins Duke FinTech program to teach financial services innovation
Interview with Marvin Chang about his decades of experience in financial services and management, gained at Caliber Home Loans, Citigroup, and Morgan Stanley
“The value of the FinTech program is to educate future practitioners, to enable them to be constantly curious and able to understand the opportunities for financial innovation.”
What courses you would be teaching to FinTech students this year and why they are important?
Marvin Chang: I will be starting with two courses: Financial institutions, products and services, and Fintech product development. The courses will offer an industry and technology perspective of how financial services and products have changed in the context of technological advancements. There is a need for graduates and for practitioners to understand and empathize with this new definition of financial services and products, which incorporate not only the product itself but the underlying architecture that enables the product.
What advice do you have for students taking your courses and for students in general in this program?
Marvin Chang: Beyond working hard and getting good grades, my big advice is to be curious. They should see in these courses a translation layer between what they've learned in Academia and the opportunities of being a practitioner at the intersection of finance and technology.
“Fintech engineers need to understand the importance of team collaboration.”
What are the main skills that someone in the fintech industry must have?
Marvin Chang: There is a lot of creativity that's involved. When you think about a fintech product, you must think about not just how you make it, but about the end customer. You also need to understand the capital markets. This is a highly regulated industry and there is a lot of opportunity for competition. In other words, everyone's trying to eat other people's lunch.
So, I think fintech practitioners need to have a lot of self-confidence; operating in this industry is like solving a complex, multi-variable equation. An underappreciated skill is team orientation which is critical in the context of this complex environment where it is nearly impossible to have expertise across the entire value chain, and therefore, building a team and recruiting complimentary talent is essential. Therefore, fintech engineers need to understand the importance of team collaboration which means that they need to understand their teammates’ objectives, how they operate and be empathetic.
How did you become a fintech engineer?
Marvin Chang: My professional journey was a mixture of everything I've talked to you about: it began with a foundation toolkit that I built up over the years, starting at university. I manifested curiosity and I found commonalities where often people saw only differences. Much like AI, which at its core is pattern matching. You start seeing patterns around the different scenarios, different use cases. Innovation is a sort of inspired laziness because you are tired of how things have been done before and you're always wondering, can I do something better? I remember that the first network connected soda machine was set up a year before I got to college, and the whole reason was because the people at the computer clusters didn’t want to go downstairs to the vending machines if their favorite soda was out. You're not taking “no” for an answer and end up creating new paths to “yes.”
Are you today what you thought during your college years that you would become?
Marvin Chang: Not at all. However, I would say in retrospect, that my academic exposure was very well suited for what I'm doing right now. I studied in a program that was at the intersection of computer science, data sciences and decision sciences. I spent time as a research assistant focused on neural networks at the at the University's Robotics Institute, which in many ways offered a preview of what was happening around technologies.
What would you consider having been the most useful part of your training?
Marvin Chang: Being able to operate at the intersections of traditionally siloed disciplines.
“When your margins are huge, the natural tendency is to stay the course. This is the type of environment rich with opportunity for disruption.”
And what motivated you to cross so many fields?
Marvin Chang: My friends joke that the only classical MBA job I’ve never done has been brand management, and therefore I acquired that competence through marriage, to a Fuqua alum. During business school, my internship was with Microsoft when it was at the center of the tech world. In its finance org, I saw the limits of incumbency when evaluating the software subscription business model. With such a successful franchise selling packaged software, its overriding fear was cannibalization. I also remembered the then-unparalleled challenge of managing $8 billion in cash on our balance sheet. If you look at Microsoft's balance sheet today, there's about $100 billion dollars in cash on hand.
As a product manager and then a general manager I developed an understanding beyond technology or finance, but of everything that was essential. I enjoyed operating at the junction between finance and technology and had the good fortune of engaging with major financial institutions at a time when a mixture of factors, most importantly technology, was wreaking havoc to traditionally fat margins. There is a famous saying attributed to Jeff Bezos that “your margin is my opportunity.” When your margins are huge, the natural tendency is to stay the course. This is the type of environment rich with opportunity for disruption.
What was an important accomplishment from your first years?
Marvin Chang: One of my first clients was the Lloyds Insurance Market. This was in the early 90’s when data exchange was done primarily with young clerks running around with leather portfolios full of paper. It had been highly successful, but highly rigid in how it got things done. This worked well until the proliferation of long-tailed claims, resulting mainly from asbestos and pollution exposure, where impacts can take decades to manifest.
So, from a data management perspective, you go from a single-threaded exercise to one that demonstrated geometric growth. I was on a team that built a highly sophisticated – for the time – distributed data analytics platform that was able to handle the claims reserving needs at a tiny fraction of traditional mainframe costs. I saw the promise of applying new technologies to the challenges faced in the sector. Later, at Caliber, I led enterprise-wide transformation initiatives that enabled the platform to scale up its digital channels tenfold amidst the torrent of activity during the pandemic year of 2020. In this role, I also cultivated strong relationships with technology innovators, which was how I transitioned from leading large company transformation to being a leader in a startup like Revvin.
You worked to establish risk management strategies for Citigroup’s mortgage portfolio.
I was curious to see what your perspective on risk management in FinTech is?
Marvin Chang: Understanding the non-linearity of risk is very important. Having the right data and models are key, but risk is dynamic, and you disregard the human element at your peril. I’ll give you three examples. (1) Citi’s CEO at the eve of the housing crisis famously stated that “as long as the music is playing, you’ve got to get up and dance.” Well, the assets that made necessary government intervention were overwhelmingly mortgages bought in the secondary markets in 2006-8 as we were frantically dancing to ward off FOMO. Meanwhile, the mortgages originated by the bank itself performed substantially better. (2) Throughout the period, there was much concern about the potential of “moral hazard” through the gaming of the safety nets provided by both the institutions and the government. While we certainly saw such gaming, most borrowers stood by their loans despite the tough times. (3) Sometimes you must wade into the crowds. While I spent much time in the conference rooms and trading desks in our Manhattan HQ, our initiatives were often executed by teams in far-off facilities. I once traveled to a processing facility on the West Virginia border to get buy-in from a team on a sizable claims processing effort. Now this was a group that had been working at 110% with little recognition. That I was the only person from HQ to willingly visit them in a long while gained me a measure of relationship equity. Sometimes it’s critical to step away from the dashboard. We get things done through teamwork.
Key elements of success in FinTech: persistence, a good team and understanding the market
What are the challenges for entering the market as a startup in fintech?
Marvin Chang: I think in many, many of the successes I've seen show the value of persistence, of being able to build the right team, having a holistic understanding of the market you're playing in and of its tempo. Like Bobby Hurley, my favorite Duke player, you need to act like a point guard and possess the court vision to understand optimal pacing, your teammates move, and be able anticipate what may happen in each case. Currently, because of the general turmoil over the last year with the markets and capital markets, the tempo, of money and of change, has changed dramatically.
How would you envision the fintech arena in a decade from now?
Marvin Chang: I think there will be a constant turn of innovation transforming the institutions. If you think about financial institutions recently, many of the names have persisted, but amidst staggering change just beneath the surface. Morgan Stanley or Goldman Sachs are nothing like they were ten years ago.
There will be a constant need for energy, for dynamism. The value of the FinTech program is to educate future practitioners, to enable them to be constantly curious and able to understand the opportunities for that type of change.
Is there a need to better educate the public, as the front users of fintech innovation?
Marvin Chang: These fintech applications are all built around their users or potential users. While the public does not need to specialize in how the products are made or function on the back end, they need to be educated to access them and use them. The challenge for us is to be able to find those key points and communicate them in the public sphere, so that the public can help motivate the decision makers to enable fintech innovation.