AI startup Eigen says the coronavirus recession will be ‘deeper than 2008.’ Here’s how the Goldman Sachs-backed company is working with banks to prevent another crash.

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  • London-based ML startup Eigen Technologies works with top tier financial institutions and law firms to analyse contracts faster and more efficiently than humans for compliance and regulatory purposes.
  • The natural language processor expects that the recession caused by the pandemic will be deeper than 2008’s global financial crisis, prompting a greater need for assessment of financial and legal documents. 
  • “When the music stops everyone looks at the docs,” Lewis Liu, Eigen Technologies CEO and cofounder, told Business Insider in an interview. “This is going to be a deeper recession than 2008 so the data that we send from banks to governments has to be as good as possible. It’s a chance for us to shine and show how our tech can help drive financial stability.”
  • Visit Business Insider’s homepage for more stories. 

The 2008 global financial crisis triggered widespread regulatory reform to keep a tighter rein on banks and their risk-taking.

Thanks to the creation of new oversight agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, there is now a cottage industry of workers focused on compliance, risk, and analytics who need a laser-sharp focus on documentation and detail.

Banks continue to try and mitigate the resulting spiraling compliance costs, while also meeting the stringent requirements designed to prevent another systemic financial crisis. Compliance cost US banks $270 billion a year in 2017, and that number was estimated to double by 2022, according to professional services firm Duff & Phelps.

To that end, technology startups across a number of disciplines are applying machine learning and AI principles to try and make compliance faster and cheaper.

One such company is London-based Eigen Technologies, a startup that says it uses natural-language processing (NLP) to teach an algorithm to read and subsequently answer questions from potentially thousands of lengthy legal and financial documents.

Eigen’s initial focus was on financial institutions but has expanded its services to law firms and will soon serve healthcare and insurance providers. 

Eigen was founded in 2014 by CEO Dr. Lewis Z. Liu and Jonathan Feuer, a former managing partner at CVC Capital Partners, who is the company’s chairman.

The startup says it has been in demand during the coronavirus crisis as businesses try and establish the pandemic’s impact on their balance sheets, and what a likely recession could do to the covenants and terms of loans and derivatives contracts. 

“When the music stops everyone looks at the docs,” Liu told Business Insider. “This is going to be a deeper recession than 2008 so the data that we send from banks to governments has to be as good as possible. It’s a chance for us to shine and show how our tech can help drive financial stability.”

Business Insider articles analysed by Eigen’s NLP platform.

Eigen


Bumper times ahead?

Eigen is backed by Goldman Sachs, Temasek, and ING, and in November 2019 raised a $37 million Series B from European investors Lakestar and Dawn Capital.

ING invested $5 million into the firm in March this year and is set to use Eigen’s NLP technology to help move away from Libor as the pricing system becomes obsolete. 

Despite the cash providing healthy capital runway into the rest of the year, Liu said it’s been a stressful period for Eigen. Staff, for example, are struggling with the more hierarchical structure the business has taken during the COVID-19 lockdown due to remote work.

Liu suggested that historically one of the startup’s strengths had been its flat working structure where junior staff could suggest exciting changes or teams could work around a complex issue around a desk replete with pizza. That’s harder to replicate via video chat. 

Liu himself has faced additional time pressures with two young children and a partner in a busy banking role.

Nonetheless, he told Business Insider that the startup is gearing up for a record Q3 and Q4 for the company. 

“We see the unfreezing of banks in the second half of the year and it should be our biggest quarter ever,” Liu said. “Law firms, in particular, have been more nimble than banks at coming to us and asking for quotes, we’ve doubled our client base of law firms during COVID-19.”

Eigen’s technology focuses on what Liu calls “small data”, a departure from traditional processes that see AI platforms read hundreds of thousands of pages to learn. Eigen’s natural language processor can learn documentation from a handful of examples, Liu said. That in turn reduces the time taken to provide insight to clients. “You don’t need to be a machine learning expert to use the platform,” according to Liu.

The result is that Eigen’s roadmap for the rest of this year is aimed at supporting its new and existing clients to better understand the risk they have in their legal and financial contracts so as to provide better reporting data to government institutions.

Liu told Business Insider that Eigen saved one unnamed financial institution millions of dollars earlier this year by identifying a trade that didn’t meet regulatory hurdles and would have taken considerable time and money to unwind. 

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