Building the cities of tomorrow: fintech in action
Recently, I had a discussion with a friend about what I do for Atlantic Fintech and what fintech means. As I started answering, I realized I was trying to package something as versatile and powerful as fintech into a few sentences, while trying not to limit it to a few check boxes.
I have encountered (and also offered) multiple definitions for fintech over time. It evolves, but in a nutshell, fintech is all about making financial services more efficient though tech expertise, capacity for innovation and agility. The sector includes companies like creditcardgenius, SnapAP, StockCalc and Four Eyes Financial that are traditionally understood to be fintech, and also disruptive innovators like The Black Arcs, Gray Wolf and Intelisys.
One of the biggest impacts a fintech company can have, is helping economic growth of a country or region. Case in point, The Black Arcs.
The Black Arcs software uses predictive analytics to allow communities and organizations visualize complex issues like land use, helping them understand how interconnected systems affect each other, and learn how to shape outcomes for greater good. Their technology combines art, design, math, and humanities, and they are collaborating with various stakeholders, governments, and not-for-profits, to bring about a real change.
For Jake Arsenault, CEO of the Black Arcs, and his partners, it all began when they started with the question "what does the world really need?". They bounced between the government business leaders, academia, conferences, and research, and validated how the built environment affects everything. They also discovered the underlying problem for governments: communicating the issue and helping people and organisations understand it in a way that they can collaborate to build the solution.
I sat down with Jake Arsenault, CEO, The Black Arcs, to learn more about their company, innovation, and also, to help me explain better why this is fintech. Excerpts from the interesting conversation below.
Jake Arsenault, Founder and CEO, The Black Arcs
Tell us more about how you use visualisation and gamification to make complex civic issues engaging.
We are using predictive analytics in an innovative way. The visualizations are the what-if scenarios we make predictions based on. I see this as a digital twin of the community, like an approximate representative model with buildings, services, transport and more, that people can explore. The heart of the analytics really is simulating specific communities using what is call a synthetic population, simulated families going about their simulated days. We spend a lot of time on the visual component using elements of game design, but what’s underlying is very mathematical and data heavy.
Most business tools tell you what to do, and they are designed for top-to-down control. We focus on a different philosophy that is built on flexibility, design, creativity, and communication. It's more "open" in the sense that it makes planning a bottom-to-top approach. In some ways, a tool to help communication and even negotiation between stakeholders.
What is the role of fintech in all of this?
In one word, risk. Let me explain. In land usage, the built environment impacts everything, every person, company, and government, from quality of life and health to emissions and economic activity. When talking about risk, we normally look at half the equation and don’t consider the inter-relatedness of the built environment. With this tool, I really believe we can help people understand geospatial. Let’s say you finance developers and a part of your portfolio is office space. What does this look like with an increase in working from home post-pandemic? Could these assets be shifted to include residential and some retail? What does that look like for all your portfolio?
Our technology also has the potential to impact the governance of organizations. Money and investment are a driving force, and it is shaping the world as we speak. Investors are beginning to demand that corporations are good social citizens. ESG (Environmental Social Governance), at least people's perception of it, now directly impacts stock value. Increasing corporate awareness of both the short- and long-term implications of their decisions can create much value. Now you can also see how capital decisions will impact you and everyone else in many ways. When you see it in front of you in a quality data-vis it's hard to ignore. So, in a big way, our technology is a tool to improve ESG performance. Understanding the cascade of downstream impacts, top of mind to city planners, is not intuitive to the uninitiated.
Take building a school, a great land-use example. One way to do it is to look at reducing capital costs by sourcing affordable land outside the city. It looks like a win, but you will forever spend more on buses, and with that your average recurring spend just went up. You also kicked municipal government in the teeth. They now must improve and maintain infrastructure around the new school. Their long-term infrastructure costs increased, probably much more than the tax base. They are now less economically sustainable for decades. You also impact lifestyle for the next generation because they would normalize not walking to school, and it would have healthcare implications in the future. This is the big dollars. Students pick-up long-term lifestyle habits that alter their health trajectory. Interesting stat, the medical system, doctors and hospitals, only contributes about 10% of people health outcomes. What really shapes people health is structural and not obvious. You started with lowering your capital costs but ended up costing a more and everyone, citizens, municipal and provincial government. Land planning can change the trajectory of a city. Corporations can also constructively shape communities if thoughtful about their placement of operations.
Jake Arsenault (left) at a product demo for the Black Arcs
The other benefit I see is that different organisations and businesses can look at your data or models and validate their ideas and plans.
That's right. For example, banks can make informed decisions on where to open a branch. They can explore convenience to customers by profiles. But they can also ensure corporate investments supports the local land-use strategy for vitality and sustainability. The key part is that since our tech is built for communication as well, they can engage local government and citizens. They will also get the credit for being a good corporate citizen. Real collaboration is the best possible PR.
You have collaborated with municipalities and regional governments and non-profit organisations, among others. What has this been like?
Yes, we're working with a lot of folks. Currently, one of our projects is to analyse data on shuttles vs ridesharing. Through our work with the Southeast Regional Service Commission, we work with Moncton, Shediac, Petitcodiac, Riverview and Sackville.
With time, the tool has found unexpected uses, especially with the pandemic. We realized we could model the spread of the pandemic and could directly connect it to our community model. We're now building a next generation pandemic modelling tool and have received federal funding to test it. The Department of National Defence has been fantastic.
Our innovation is disruptive. Normally, it takes months of labour for city planning professionals to complete the research, prepare a report on something like ideal school placement. With our tech, impacts analysis is generated literally within meetings. The timeline moves from months to minutes. Everyone can be involved, bring the silos together to collaborate, and you can explore trade-offs to work out a strategy, to work out a vision.
The future for solving civic issues just got very interesting!
The challenge in the past has been that solving problems was reduced to very black and white decisions. A focus on immediate dollars and ignoring all these complex downstream impacts. While reductionism is a classic scientific and management mindset, it is not the only tool in the toolkit. For example science has moved on to understanding interconnectivity or systems thinking. Coordinating between the needs of multiple levels of government, the developers and community stakeholders at the same time is like solving multiple equations simultaneously. You need to look at everything at once to really understand any single part.
It's challenging to explain to someone who is not a part of it. This is where gamification and visualization come into play, and suddenly the opportunities are thrown wide open.
You do a lot of primary research and partnerships. Do you have a networking strategy?
Networking cannot be an afterthought. You have to start networking before you build something, but as a startup, it's easy to get caught up in thinking you should focus on getting the money first.
When you are building something for people to use, it becomes a part of the process. Before we began, I was in touch with Ottawa, Boston, Halifax and others, and moving around community centres. We’ve been networking all the way through to understand pain points, build demos and testing the technology. I never would never dreamed up this solution, it was discovered. Start with focusing on the problem, and let the solution follow.
That is beautiful, and may be the best piece of advice ever given by a founder. What's next for you?
The things I learnt along the way have blown my mind. City planning is shaping our lives one road and one building at a time, and we are working towards a future where we can control it for the best outcome. I mean best for both us and the environment. A similar analysis and tech engine can also be used to fight poverty, and how everything is connected just blows my mind. It was a real journey for me.
We want to move ahead the practical calculation of the health impacts of civic planning, using data and analytics to let anyone understand the link between health, built space and the environment. We are working with the best possible data and people to make this happen. It will be extremely impactful for governments and insurers when we have it.
You're obviously not a real business until you export outside New Brunswick. We want to sell in the US and work with a network of players in the land use community. We're looking at Atlanta and New York now, and have been able to get a footing in terms of connections, thanks to you and Atlantic FinTech. The fintech conferences have been a great place to build connections and we have recruited a former c-suite professional as a Board Member. When you work with one top-level executive from the US, they help you work your way through the labyrinth. Her experience on how to sell in the US and scale-up past $100M is a huge help.
The Dubai Future Accelerator program has helped us benchmark our progress and helped us understand how unique we are, even globally. I think we are on track for setting the bar high for gamifying civic engagement, globally. It has only taken 4 to 5 years of innovation to reach where we are today, and the clock is still ticking for progress. Tick, tick, tick.