Regulating intelligence

https://thefinanser.com/2024/02/regulating-intelligence/?utm_source=rss&utm_medium=rss&utm_campaign=regulating-intelligence

There are many questions about how we can regulate artificial intelligence, and these grow every day. With deep fake voices and faces, anybody could be convinced to give away their money, bank details or more. How do you regulate AI?

To illustrate a basic form of AI, I asked Deepmind to create a video about the future of fintech. Here’s what it came up with:

The text was generated by ChatGPT and automated into a fairly clanky news video. But then OpenAI launched Sora last week, a much more stylish video generator. Here’s an example. Show me a video of a Kangaroo dancing or Mammoths in the snow and here’s what you get …

It won’t be long before anyone from any desk in any part of the world can create a convincing fake of a boss or family member and say: “please send money as I’m in trouble”.

Forget the Nigeria 411 scam, which is now more than ten years old, or the Facebook romance scams – did you know that Meta generates three out of five online scams? – we are moving rapidly to a place where you could be seeing fake news, fake faces, fake everythingn online, all the time.

So, how do we regulate this?

The answer is difficult as the horse has already bolted, but it must be deeply concerning that AI is, on the one hand, making our world a much better place but, on the other hand, making our world a much more dangerous place.

But then this is true of all innovation and progress. Are we Luddites or are we able to keep up? Were the Luddites right or wrong?

TBH, we could argue either way. Every step forward creates opportunity and danger, and AI is no different. Thousands of jobs will disappear, but new jobs will appear. We need people to train AI algorithms; we need people to make sure they work right; we need people to fix them when they go wrong; we need people to improve them … and so on. In other words, AI is only as good as the system that created it and that system is run by people.

So sure, we can let that system run away, unregulated and created deep fake scams, but will we? I hope not. The challenge however is how to get the deep fake world checked and regulated when it’s already out there.

 

Things worth reading: 20th February 2024

https://thefinanser.com/2024/02/things-worth-reading-20th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-20th-february-2024

Things we’re reading today include … Capital One Is Buying Discover Financial – WSJ Rothschild Family: Two Banks Fighting Over Clients, Power And Family Name (bloomberg.com) Bank of England is crushing economy, says former chief economist Andy Haldane | This is Money Brazilian FinTech Stark Bank Tripled Payments Processed in 2023 (pymnts.com) China, Crypto and…

The post Things worth reading: 20th February 2024 appeared first on Chris Skinner’s blog.

3 out of 5 frauds come from Meta

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Appearing in a Parliamentary session the other day, Woody Malouf, Revolut’s head of financial crime, said Meta platforms were “being used as a hotbed for scams” and estimated that 3 out of 5 scams are being generated by Facebook, Instagram and WhatsApp

I’ve no idea about your experience but my experience is that anything I book or buy on Meta’s platforms is generally awful. The result? I no longer order anything through their services. Why would you if the order is always awful?

The thing is that this is not an insignificant thing. You lose a pound here or there, it’s no big deal but, if you put it altogether, the UK Payment Systems Regulator estimates that the accumulated losses in social scams was half a billion pounds ($500,000,000) in 2022.

This is why the law is changing and in the UK, starting in October, payment firms that allow fraudulent payments to be sent and received must reimburse victims, unless they can show they were grossly negligent. This is particularly relevant to challenger banks and payment firms, as their exposures are greater than traditional banks according to the stats.

But going back to basics, you have to wonder how Meta manages its services.

In this area, I’m talking finance but, in more general discussions, how many teenagers are being subject to cyberbullying and self-harm messages? How many people are being sucked into fraud and romance scams?

The interesting dialogue is that we began two decades ago with social networks and yet, today, they feel like antisocial networks. Meta’s empire is encouraging people to be ripped off, lose money, be duped and commit suicide. What are thye doing about it?

This is a big question that should be shouted at Sir Nick Clegg, the former Liberal Democrat leader and former Deputy Prime Minster of the UK. Nick is now the head of global affairs for Meta. NICK: WHAT ARE YOU DOING ABOUT THIS?

Nick replies in a Medium column by saying that “technology must serve society, not the other way around”.

This is true. Our use of Meta platforms is under our control. Having said that, if three out of five frauds are generated by Meta, and teenagers are dying due to their platforms, should we not take more action?

If you’re interested, you can watch the Parliamentary session with Revolut here and, if you’re wondering about the suicides and murders caused by Meta platforms, checkout these two stories about Brianna Ghey and Molly Russell.

Things worth reading: 19th February 2024

https://thefinanser.com/2024/02/things-worth-reading-19th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-19th-february-2024

Things we’re reading today include …

 

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

The Finanser’s Week: 12th February – 18th February 2024

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This week’s main blog discussions include …

How old banks are responding to challenger banks (research report)

I got an interesting research report from Economist Impact the other day, commissioned by Temenos. Usually I ignore such emails and updates, but this one was interesting as it’s focused upon how traditional financial providers are competing with challengers like Monzo, Starling, Bunq and Chime. According to the study, “Challenging the challengers: Europe’s banks face…

Why Big Tech giants are enshittifying our lives

I’ve just finished a very long and fascinating read by Cory Doctorow in The Financial Times, talking about how the Big Tech giants have turned our world to shit. He calls it the enshittification process. The process runs in four stages: they claim platforms are good to their users: don’t be evil; making the world…

I love you, but how much?

It’s that day where we all share our love. Well, not all of us. According to stats, one in three Brits have no love. Awww, I’m sorry. Having said that, if you do have a partner, then what do you do today? It may be nothing – after all, money can’t buy me love –…

Is the future frightening or great?

My partner called me and said she was in trouble. She had just been to the bank and was overdrawn by $1,500. Could I send $4,000 quickly to stop the bank from freezing her account? Of course, I did … only to discover it wasn’t her. People are warning us that quantum computing, deepfake and…

Does email matter anymore?

I just got a note about how email marketing is essential for financial services firms. Really? Email is dead. Email began in the 1980s, and spread rapidly. I learned very early on about the dangers and opportunities of emailing. Specifically, my then boss told me to cancel a programme that the US bosses had endorsed…

How old banks are responding to challenger banks (research report)

https://thefinanser.com/2024/02/how-old-banks-are-responding-to-challenger-banks-research-report/?utm_source=rss&utm_medium=rss&utm_campaign=how-old-banks-are-responding-to-challenger-banks-research-report

I got an interesting research report from Economist Impact the other day, commissioned by Temenos. Usually I ignore such emails and updates, but this one was interesting as it’s focused upon how traditional financial providers are competing with challengers like Monzo, Starling, Bunq and Chime.

According to the study, “Challenging the challengers: Europe’s banks face the competition”, almost half (43%) of European banks are investing in fintech start-ups, and a third (36%) are building their own greenfield digital bank or fintech company.

European banks are also migrating core banking systems to public cloud and SaaS in greater numbers than their counterparts in other regions. Over a fifth (21%) of European banks see cloud as a strategic priority, ensuring their operations are agile and secure to compete with more nimble competitors.

AI is also a key part of their technology investment strategy, particularly to improve the customer experience and support digital marketing, with three quarters (75%) of European bankers believing that the banking sector will be significantly impacted by generative AI.

The report reveals European banks are more likely to view neobanks as their company’s biggest competitors in the next five years compared to other regions. However, payment players and technology providers continue to be top of mind, with payments being the space European banks predict new entrants will gain the most market share. HSBC recently launched Zing, a new multi-currency payments app to compete with the likes of Wise and Revolut.

About this research:

Economist Impact conducted a study, commissioned by Temenos, to understand emerging trends in the banking industry. This report presents insights from a global survey of 300 executives in retail, commercial and private banking spanning Europe (25%), North America (23%), Asia Pacific (18%), Middle East and Africa (17%), and Latin America (17%). Respondents perform various job functions, such as IT, customer service, finance, marketing and sales, strategy and business development, and general management, among others. Half of the respondents were C-suite executives. This is the seventh year that Economist Impact has conducted this survey. The research also included interviews with industry practitioners to gain further insights.

Things worth reading: 16th February 2024

https://thefinanser.com/2024/02/things-worth-reading-16th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-16th-february-2024

Things we’re reading today include …

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

Why Big Tech giants are enshittifying our lives

https://thefinanser.com/2024/02/how-the-big-tech-giants-have-turned-our-world-to-shit/?utm_source=rss&utm_medium=rss&utm_campaign=how-the-big-tech-giants-have-turned-our-world-to-shit

I’ve just finished a very long and fascinating read by Cory Doctorow in The Financial Times, talking about how the Big Tech giants have turned our world to shit. He calls it the enshittification process. The process runs in four stages:

  1. they claim platforms are good to their users: don’t be evil; making the world connect;
  2. they abuse their users to make things better for their business customers;
  3. they abuse those business customers to claw back all the value for themselves; and then …
  4. they die.

In this area he uses Facebook as a good example, and how it grew from a Harvard campus website to connect those you fancied into a global behemoth. It begins with connectivity, then moves into lock-in and ends with abuse of all those connected from users to advertisers to publishers.

He then moves on to talk about the things that stop enshittification, namely: competition, regulation, self-help and workers.

Before everything turned to shit, these constraints stopped the bosses running wild. As Cory puts it: their worst impulses were checked by competition, regulation, self-help and worker power. So what happened?

What happened is that these four constraints became eroded and weakened. Governments allowed monopolies to flower in the 1980s, as the best firms would win. That is good for consumer welfare and based on consumer choice. A good example? Amazon. Cory cites the example of Diapers.com. When Diapers.com refused Amazon’s acquisition offer, Amazon lit $100mn on fire, selling diapers way below cost for months, until Diapers.com went bust, and Amazon bought them for pennies on the dollar.

Once competition is eliminated then the next constraint – regulation and governance – can also be ignored. This is because companies not only become too big to fail but, also, too big to jail.

It’s because these Big Tech firms pretend that they are headquartered in Ireland, one of the EU’s most notorious corporate crime havens, whilst Ireland competes with the other havens like Malta, Luxembourg and Cyprus, to see which country can offer the most hospitable environment for tax avoidance. It’s not just tax avoidance however, but also avoidance of other regulations such as the invasion and abuse of data. Customer data, in particular.

His next argument is that self-help, such as the ability to block web ads or privacy invasion, has also been destroyed. This is because the regulations of the 1990s gave the Big Tech firms the ability to lock you in and stop you getting out.

An example?

The  Digital Millennium Copyright Act that Bill Clinton signed into law in 1998, and the EU imported it as Article 6 of the EUCD in 2001. The law means that if you create something that is published on Amazon, for example, and then want to take it off Amazon, for example, then you, as the creator of the work, can be fined $500,000 and possibly jailed for five years because you assigned them the copyright. WTF?

Finally, workers.

Workers in Big Tech firms were pampered and cuddled. They had gyms, playrooms, creches for their kids and lots of indulgence from free beer to weekend barbecues. But now they realise that their value is zero.

Workers are no longer a check on their bosses’ worst impulses as the company now turns around and can just say: “turn in your badge and don’t let the door hit you in the ass on the way out”.

Jeez, this is depressing … but then Cory moves on to say that the same four things that have made everything turn to shit can get us out of it.

We need to restore competition, and we are; we need to reinforce regulatory oversight of these Big Tech firms, and we are(ish); self-help is a great idea, except that it is difficult to enforce if people want to use these services; and the increasing unionisation of technology workers is starting to fight back against their labour abuses.

Nevertheless, the core essence of Cory’s message is that “software doesn’t eat the world, it just enshittifies it”.

Cory Doctorow is a special adviser to the Electronic Frontier Foundation and a visiting professor of computer science at the Open University. 

This is the short version of his thesis which is a long read but, if you have the time, it could be worth it.

Things worth reading: 15th February 2024

https://thefinanser.com/2024/02/things-worth-reading-15th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-15th-february-2024

Things we’re reading today include … Monzo reaches nine million customer milestone (finextra.com) Commonwealth Bank chief executive Matt Comyn makes shock cash confession | Daily Mail Standard Chartered needs drastic action, not diplomatic polish (ft.com) How investors can hold greenwashing banks to account — The Bureau of Investigative Journalism Zain Launches Innovative Fintech App Offering…

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Things worth reading: 13th February 2024

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Things we’re reading today include …

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

The Finanser’s Week: 4th February – 11th February 2024

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The main blog discussions this week included …

Do you need to be a bank in real life to be a bank in virtual life?

Vitalik Buterin, the guy who created Ethereum cryptocurrency and smart contracts, blogged the other day about what happens when AI and blockchain collide. Funnily enough, that’s the theme of my new book Intelligent Money. Vitalik cites four major areas where blockchain and AI will make a difference, and each has different ramifications. The focal point…

Can you close the gate after the horse has bolted?

We need global regulation of all technology … but can we? Building on yesterday’s piece, there is a call in many circles for the global regulation of Big Tech. In fact it goes far further than Big Tech. It’s a call for regulating everything online. From cryptocurrencies to social media to artificial intelligence … it…

Could we run the banking system outside the banking system?

I’ve asked myself this question often recently: could the banking system be run outside the banking system? I guess the start point of this discussion is: what is the system? Just like to be or not to be, that is the question. What is the system?

Does ESG matter?

Two years ago Stuart Kirk, the then head of responsible investing for HSBC, delivered a mic dropping speech at the FT Moral Money conference. What did he say? Here’s a few quotes:

Who invented WiFi?

Historically, there are some technology stories that stand out. Alan Turin; Tim Berners-Lee; Bill Gates; Mark Zuckerberg; Jeff Bezos; Elon Musk … but what about Hedwig Kiesler?

 

I love you, but how much?

https://thefinanser.com/2024/02/i-love-you-but-how-much/?utm_source=rss&utm_medium=rss&utm_campaign=i-love-you-but-how-much

It’s that day where we all share our love. Well, not all of us. According to stats, one in three Brits have no love. Awww, I’m sorry. Having said that, if you do have a partner, then what do you do today? It may be nothing – after all, money can’t buy me love – but most of us will spend around  fifty quid (£50/$60). The question is: is it worth it? and, even if it is, is it enough or too much?

Flowers, dinner, a trip to the sea of even a short holiday. How much should you spend to show your love? That’s a tough question and we need to remember that, like Mother’s Day, Father’s Day and all those other days, Valentine’s Day is created as a commercial platform to encourage you to spend as much as you can on showing your love. Oh dear, have I just ruined the party? If I did, then please have a wonderful day for the 65% of people who celebrate. Finder.com reckons that UK folks will spend over £1.5 billion today, with millennials the most likely to celebrate (4 in 5). I guess that’s pretty obvious as if you’re in your 30’s and 40’s then you’ll be more likely to have a partner than those in their teens or OAP’s.

According to Finder 73% of millennials will be spending an average spend of £61 each and Generation Z is not far behind, as three-quarters of them will be celebrating and 72% spending money. They have a higher planned spend than millennials, at £67 each because their relationships are younger and in fuller bloom. Meantime, the not so OK Boomers, who are mostly divorced I guess, won’t be celebrating so much … or maybe it is a reflection of how society is moving.

Years ago, we were talking about how generations have shifted from marriage and children to singularity and just being whoever you want to be. Today, that has moved even further to be whatever gender you want to be. Time moves on.

Having said that, and consistent with the valentine’s numbers from Finder, the UK government statistics office confirms that there are just over 28 million households in the UK and that most, two out of three, are families where many (57%) living together rather than being a single parent.

Anyways, for the rest of you (8.3 million) who are living alone, I wish you a wonderful day as you’ve just saved yourself fifty quid or thereabouts. Meanwhile, why not watch this video that tells you why it is called Valentine’s day and why we celebrate it today …

And the Beatles may have that money can’t buy me love but boy oh boy, it sure does help.

Things worth reading: 14th February 2024

https://thefinanser.com/2024/02/things-worth-reading-14th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-14th-february-2024

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

Is the future frightening or great?

https://thefinanser.com/2024/02/is-the-future-frightening-or-great/?utm_source=rss&utm_medium=rss&utm_campaign=is-the-future-frightening-or-great

My partner called me and said she was in trouble. She had just been to the bank and was overdrawn by $1,500. Could I send $4,000 quickly to stop the bank from freezing her account? Of course, I did … only to discover it wasn’t her.

People are warning us that quantum computing, deepfake and AI is going to create a huge can of worms.

“AI, powered by quantum computing, is going to put financial crime on steroids.” Virgin Money CEO David Duffy

And yet Lori Beer, CIO at JPMorgan Chase, says that: “Financial services has been identified as one of the first industries that will benefit from quantum technologies.”

Who’s right and who’s wrong? Well, both and neither.

This is because technology, as always, has a positive and negative vibe. This has been true since humans invented the wheel and fire. You may say I’m wrong, but think about it. Imagine a neanderthal seeing his friend create fire. Is your reaction: “wow, that’s great, I can now eat hot food!”; or is it: “what are you doing you freak, that could kill us. Put it out now!”

The wheel?

“Woohoo, we can go and get around quicker!” or “WTF? The speed that goes could kill us!”

Whenever we make progress – usually with technology – there is fear and opportunity. This is exactly where we are right now with AI and quantum computing. Fear and opportunity.

For financial markets, quantum will turbocharge flash computing. Global markets will operate in nanoseconds without limits. That is a huge opportunity and truly frightening. The same is true for cybercrime and criminal activity. So yes, there will be more crime and concern, but it is no different to the way it has ever been.

Just as with the wheel and fire, quantum and AI just moves the human race along a path of development and progress that is unstoppable. In fact, it is likely that soon we will have something else to be bothered about, such as multiplanetary travel and life on Mars. Every time we move forward and develop, we create fear and opportunity. It is a basic of humanity.

So yes, quantum and AI creates huge issues with fraud, but equally in fighting fraud. The first uses of AI has been mainly in fighting fraud. As PWC note:

“AI is already widely used to prevent and detect fraud, in particular within banking and technology companies. Machine learning is commonly deployed to improve the detection of suspicious activity and malicious content.”

As Rahul Patil notes:

“Quantum computing holds tremendous promise for revolutionizing algorithmic trading. With its inherent ability to handle massive amounts of data and solve complex optimization problems more efficiently, quantum computers have the potential to enhance trading strategies, minimize risk, and optimize portfolio allocation like never before.”

Are we frightened or excited about the future? Do new technologies improve humanity or destroy the things we believe in?

Your choice, but I’m about to see if my cat is dead or alive … (when you know, you know)

Does email matter anymore?

https://thefinanser.com/2024/02/youre-still-using-email/?utm_source=rss&utm_medium=rss&utm_campaign=youre-still-using-email

I just got a note about how email marketing is essential for financial services firms. Really? Email is dead.

Email began in the 1980s, and spread rapidly. I learned very early on about the dangers and opportunities of emailing. Specifically, my then boss told me to cancel a programme that the US bosses had endorsed. I did so, and sent an email. Six months later, I met the US boss, whose programme I had cancelled. Being hugely respectful, I said hello to the CxO and he said: “so you’re that Skinner” … it was loaded with suspense. “Yes, I’m Skinner”, I said. “And you’re the one who cancelled my programme”, he said. The friction and tenseness grew. “Yes”, I said. He looked at me with a serious frown and the room froze. “Well, just so you know, I’m watching you”, he said.

It was at this point that I realised an email can make or break you. You have recorded your opinions, in writing and immortalised for all time.

Decades later, we have that immortalisation in every form online. From email to social media to video, we are exposing ourselves every day to the world, but is email still relevant?

My email is filled every day with spam, phishing, useless marketing and irrelevant chat. Rather than email, I use X, Meta, LinkedIn and Discord for communication. And this is the point: communication.

Humans rely on communication and connection, and that is why the smartphone networked revolution of the past years is so revolutionary, in that we can all now connect and communicate.

The thing with today’s communication and connectivity is that we call it social media and yet a lot of it is antisocial media. We can see this in so many cases – the most recent in the UK is the death of Brianna Ghey, who was stabbed to death by someone she thought was her friend – but there are many other cases.

It is why, this month, a master complaint was filed combining lawsuits from more than 400 plaintiffs across the US against social media firms for their “role in creating a youth mental health crisis through their addictive services”.

It is why, this month, America called in these social media bosses and asked them to explain themselves. This is because, a bit like AI, we haven’t worked it out yet. This was evidenced by the appearance of  Mark Zuckerberg, Founder and Chief Executive Officer, Meta; Linda Yaccarino, Chief Executive Officer, X Corp; Evan Spiegel, Co-founder and Chief Executive Officer, Snap Inc; Shou Chew, Chief Executive Officer, TikTok Inc; and Jason Citron, Chief Executive Officer, Discord Inc; was so significant last week.

Lawmakers wanted to know what they are doing to protect children online. The answer seemed to be nothing.

Meantime, I’ve distracted myself. This blog was about email. Does email matter anymore? I don’t think so. Therefore, when marketing financial services, I would forget email. Focus on virality in TikTok; sharing on YouTube; getting a message out on X; and knowing that everyone is talking about you … but not on email.

 

Things worth reading: 9th February 2024

https://thefinanser.com/2024/02/things-worth-reading-9th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-9th-february-2024

Things we’re reading today include: ‘Trendy’ Monzo now feels like a children’s bank – I’m leaving for Barclays (telegraph.co.uk) JPMorgan Survey Shows Over Half of Institutional Traders Don’t Want Crypto Exposure (coindesk.com) Fintech engineer grounded by crypto fraud caper • The Register Group pretends to be dead outside Southampton bank branch (yahoo.com) Philip Hammond had…

The post Things worth reading: 9th February 2024 appeared first on Chris Skinner’s blog.

Do you need to be a bank in real life to be a bank in virtual life?

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Vitalik Buterin, the guy who created Ethereum cryptocurrency and smart contracts, blogged the other day about what happens when AI and blockchain collide. Funnily enough, that’s the theme of my new book Intelligent Money.

Vitalik cites four major areas where blockchain and AI will make a difference, and each has different ramifications. The focal point around his view is likening blockchain and AI to a game, and the thoughts and use cases of how you play the game. In this context, he sees four clear areas where AI and blockchain come together:

  • AI as a player in a game [highest viability]: AIs participating in mechanisms where the ultimate source of the incentives comes from a protocol with human inputs.
  • AI as an interface to the game [high potential, but with risks]: AIs helping users to understand the crypto world around them, and to ensure that their behaviour (i.e. signed messages and transactions) matches their intentions and they do not get tricked or scammed.
  • AI as the rules of the game [tread very carefully]: blockchains, DAOs and similar mechanisms directly calling into AIs. Think e.g. “AI judges”
  • AI as the objective of the game [longer-term but intriguing]: designing blockchains, DAOs and similar mechanisms with the goal of constructing and maintaining an AI that could be used for other purposes, using the crypto bits either to better incentivize training or to prevent the AI from leaking private data or being misused.

These are explained in far more depth in his blog, but I simplify this to a different space. That space is a question. The question is: what happens when virtually augmented reality, the metaverse, artificial intelligence and cryptocurrencies collide?

Hmmmm …

I’m sure some of you will say that you already live in an alternative reality of networked amazement. I would rather say that we do have an alternative reality … based on reality. The key to this is that money, currency, payment and value – whether real or virtual – is based upon real world operations and values.

I learned this lesson years ago, when dealing with governments and banks about regulations. Banks haven’t asked for thousands of regulations. They have them because they’re needed. The idea is to keep the system safe and secure, reliable and resilient, trusted and tenable.

So, if you create an alternative universe that is not based on reality but is virtual reality, what is the financial system required? Well, the same one we have already. It does not mean the same players and companies, but the structure of finance has emerged and evolved over centuries as that very system that can be trusted. Do you want another one? Tough, as it isn’t going to happen.

What will happen is a flood of companies that understand how virtually augmented reality, the metaverse, artificial intelligence and cryptocurrencies collide, and create a whole new range of companies that can support such developments.

They will be new, different and many unrelated to the boring banks of old, but they will still be banks that are regulated, insured and trusted in the same way as our boring banks of today are.

Can I prove it?

Yes: December 2008.

Back in 2008, Second Life – a virtual world – allowed commerce to be transacted by converting real US dollars to virtual dollars and, as a result, everyone started to test commerce in virtual worlds through the service. For example, several banks invested in major projects in Second Life, including ING, Wells Fargo, SAXO Bank and Deutsche Bank.

However, several banks also operated in Second Life that were managed by guys in their bedrooms. These included banks such as Ginko Bank, run by a Brazilian chap at home.

The trouble Ginko Bank experienced started when internet gambling was forced to close under US Laws.  The management of Second Life decided that they also had to close access to gambling in virtual worlds in July 2007 to comply with this policy, which led to a major run on the virtual banks.

Until this date, a lot of the commercial transactions taking place in Second Life, where people converted real US dollars to Linden dollars, were for gambling purposes apparently. Therefore, the closure of gambling denizens in the virtual world meant that folks immediately started to take money out of the virtual banks, a bit like Northern Rock but worse.

So imagine you are Andre Sanchez in Sao Paulo, the one-man band behind the virtual Ginko Bank.

You have over a million real US dollars on account, translated into around 275 million Linden Dollars that you are managing for the Second Life community.

Suddenly, your customers demand their money be converted back to real dollars, and you drown in their demands so you just close down the virtual bank, leaving punters with losses of around $750,000 in real life.

This led to calls for compensation from Linden Labs, who operate Second Life, but they said it wasn’t their job to regulate the banks.

The outcome was that it was their job to regulate banks and Linden Labs ended up saying: to be a bank in our virtual life, you need to be a bank in real life.

Things worth reading: 8th February 2024

https://thefinanser.com/2024/02/things-worth-reading-8th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-8th-february-2024

Things we’re reading today include:

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

Can you close the gate after the horse has bolted?

https://thefinanser.com/2024/02/how-to-close-the-gate-after-the-horse-has-bolted/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-close-the-gate-after-the-horse-has-bolted

We need global regulation of all technology … but can we?

Building on yesterday’s piece, there is a call in many circles for the global regulation of Big Tech. In fact it goes far further than Big Tech. It’s a call for regulating everything online. From cryptocurrencies to social media to artificial intelligence … it needs regulations. The question is: can we regaultre the network we have released?

In some ways, this was best illustrated by what happened in The Arab Spring. Remember that? The Arab Spring was a decade ago when many of the Middle Eastern nations rose up and fought back against their oppressive governments. The thing that I always rememvbered about the Arab Spring was what happened in Egypt, where Hosni Mubarak was desperate to suppress such an uprising and, at a critical point, broke the internet. The two main communication lines into Egypt were cut. Did it break the uprising? Did it end the struggle?

No.

Once the violence broke out and the internet was cut, everyone turned to SMS messaging – yes, that still works folks! In fact, many Egyptians were assisted by people all over the world, keeping them up to speed with what was going on in their own country and connections to assist them if needed. It was a talismanic moment for me, as it showed the power of our network: the network of the people.

It cannot be regulated as the horse has bolted already; but can it be managed?

Possibly, as the network of the people is weak due to the centralisation of the owners of the network. Just as with the Luddite movement, to rally against the owners of the machinery and equipment of the industrial era, we have a movement today to escape the Big Tech owners of the networked era.

And interestingly, when we talk about Luddites, are they barbarians or justified protestors? Some would say that being a Luddite is actually a good thing and we should break things at work.

In the Nineteenth-century, English textile workers responded to the introduction of new technologies on the factory floor by smashing them to bits. For years the Luddites roamed the English countryside, practicing drills and manoeuvres that they would later deploy on unsuspecting machines. The movement has been derided by scholars as a backwards-looking and ultimately ineffectual effort to stem the march of history; but, for Gavin Mueller [author of Breaking Things at Work: The Luddites Were Right About Why You Hate Your Job ] , the movement gets at the heart of the antagonistic relationship between all workers, including us today, and the so-called progressive gains secured by new technologies. The luddites weren’t primitive and they are still a force, however unconsciously, in the workplaces of the twenty-first century world.

We think of Luddites as technophobes but it’s more to do with technochange, progress and the concentration of power in the hands of the few. We live with this today, as we have for the past two centuries and more. Nothing much has really changed between the industrial revolution and the networked revolution. Power is still concentrated and centralised when, if the true spirit and vision of the networked world was realised, it should be decentralised and spread amongst the money.

It will be interesting to see if that ever happens.

In the meantime, Bezos, Musk, Zuckerberg and co will continue to get fatter from the irchness of the networked world. I wonder if anyone will ever break that?

Bring out your inner luddite and follow Tim Berners-Lee.

So, whether we are centralised or decentralised, the core question is can the network be regulated and the likely answer is that it will self-regulate. It is not down to governments to regulate the networked economy; it’s down to the people. After all, it is a network of people, and that network of people can accept or reject the offers of Bezos, Musk and Zuckerberg, in the same way that they could reject the powermongers of the industrial era and the governments of that time.

That still leaves us with the thorny issue of how to close the gate after the horse has bolted?

Things worth reading: 7th February 2024

https://thefinanser.com/2024/02/things-worth-reading-7th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-7th-february-2024

Things we’re reading today include …

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

Could we run the banking system outside the banking system?

https://thefinanser.com/2024/02/could-the-banking-system-be-run-outside-the-banking-system/?utm_source=rss&utm_medium=rss&utm_campaign=could-the-banking-system-be-run-outside-the-banking-system

I’ve asked myself this question often recently: could the banking system be run outside the banking system? I guess the start point of this discussion is: what is the system? Just like to be or not to be, that is the question. What is the system?

It’s a debate I’ve been having for years – ever since bitcoin appeared and challenged the system. What is the system? Is it run by a government – a centralised authority – or can it be run by the people – a decentralised democracy?

This is the very heart of the debate we are having today, particularly in this debate around centralised currencies versus decentralised cryptocurrencies. Which system works?

The traditional view would be that you have to have government, and government control. The enlightened view is that you have to have governance, and governance control. It’s a subtle difference, but very important, as it’s all about belief and following. What do you believe in? Government and state or network of the people? Would you believe more in the verdict of a court with 12 jurors, or in the view of a few billion people online?

It’s a fascinating debate as we have never had a few billion people connected in a network. Is it really a billion people? Actually, according to estimates, it’s over five billion people. That’s most of Planet Earth. Five billion people can make judgements, views, likes and shares, and verdicts. You could be a good player or a bad actor overnight, based upon the views and opinions of the global audience.

Which brings us back to the system. Is the system global or local? Is the system run by your nation or your state or your network?

These questions would never have appeared in the past, as we weren’t networked in the past. In the past, we lived in our village or town or city and that was what we knew and who we knew. However, in the past century, all of this has changed. In the past century, we have globalised. A hundred years ago, no one flew and yet, today, we fly every day. Getting on a plane is like getting on a train today. It’s just moving us from A to B. And so the same applies to the system and, I guess this is why I’m blogging about it, what is the system?

Is the system the nation, the state, the government and our country; or is it the network, the people, the democracy and our views?

We are in a critical moment of time – I have called it the fourth revolution of humanity – where we need to recreate our government, governance, society and structure. A little like Les Miserables we have to create and break down the barricades. Do you hear the people sing?

The reason why this is important is that the banking system is run by government. Could it be run by the network? Could the banking system that we know be completely disrupted and run by the network? Could the world change so dramatically that governments, countries and management that we knew of old be completely laid waste by the rise of Big Tech, the network and a collection of connected people who really don’t care about the past and just want a better future?

Oh my gosh. I’m asking too bigger questions. Let’s just get back to normal and switch on Netflix (a globally connected entertainment channel – just saying).

Does ESG matter?

https://thefinanser.com/2024/02/good-guys-dont-make-money/?utm_source=rss&utm_medium=rss&utm_campaign=good-guys-dont-make-money

Two years ago Stuart Kirk, the then head of responsible investing for HSBC, delivered a mic dropping speech at the FT Moral Money conference. What did he say? Here’s a few quotes:

“Who cares if Miami is six metres underwater in 100 years? Amsterdam has been six metres underwater for ages, and that’s a really nice place.”

“The average loan length in a big bank like ours, HSBC, is six years. What happens to the planet in year seven is irrelevant.”

“There’s always some nut job telling me about the end of the world.”

It wasn’t long before his departure from HSBC. But is he wrong? I said he was at the time but now, contributing regular columns to The Financial Times, he has a voice and outlet once more. In his latest column (January 27), he claims that we are all hypocrites about corporate governance. It’s an interesting column, claiming that being good guys doesn’t make money.

“Academic studies of governance and shareholder returns struggle to find a definitive positive relationship — let alone causation. Indeed, a Journal of Corporate Finance paper in 2022 showed that poor governance stocks have actually outperformed good ones since 2008.” He adds that “the most comprehensive long-run analysis I’ve seen of ESG scores versus returns — by Rómulo Alves, Philipp Krüger and Mathijs van Dijk — shows no relationship at all”.

Hmmmm … as  I read this, I was agreeing with the analysis and commentary. But then, on reflection, I completely disagree with it. The reason being that ESG and all of its implications, is meant to drive companies and leaders to do better for the world. It’s not just about environment, but the relationship with society and staff. Some people may not like the word staff, so let’s call them associates, colleagues, team members or slaves.

Anyhow, the gist of Stuart’s column made me think that companies who focus upon doing good do not outperform companies that do bad.

But what does that statement mean? It means that the financial system is geared towards incentivising and motivating leaders, governments and management to act in a way that does bad. Is this true?

According to the articles Stuart cites,  the answer is yes. For example, from the paper by Alves, Krüger and van Dijk:

We aim to provide the most comprehensive analysis to date of the relation between ESG ratings and stock returns, using 16,000+ stocks in 48 countries and seven different ESG rating providers. We find very little evidence that ESG ratings are related to global stock returns over 2001-2020.

In other words, returns on investment are greater in companies that act badly, rather than those that act better. That’s my take on this anyway, and is well illustrated by the man used as the picture on Stuart’s article: Elon Musk.

Elon is admired worldwide and became the richest man in the world through his co-creations of Tesla and SpaceX. But, when it comes to ESG, he fails. The best way to illustrate this is the spat he’s had with Standard & Poor’s after they created the ESG Index. His score? 37 out of 100. The reason? His companies treat their people badly (read more here).

But then the same can be said of Jeff Bezos – Amazon has a ruthless work ethic – and Steve Jobs, the founder and CEO of Apple, was renowned for his adversarial work management style.

In other words, be an asshole and make money or be a good guy and lose … or that’s one way to see the world. Unfortunately, there may not be a world based on that ethic but, thanks to Elon, we can go and live on another one.

 

“I don’t know who the good guys are anymore. But I do know what the enemy is. It’s the compromise of principles. You lose the war when you lose your principles. And the first principle is to look out for your comrades.” Karen Traviss, Author

 

Things worth reading: 6th February 2024

https://thefinanser.com/2024/02/things-worth-reading-6th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-6th-february-2024

Things we’re reading today include … Residents warned about crypto investment scams after one victim loses nearly $5m| The Guardian Why crypto exchange Kraken’s security team lives in the shadows (fnlondon.com) PayPal launches the first FinTech stablecoin (PYUSD) (businesscloud.co.uk) Enterprise fintech market may reach $20 billion by 2030: report – The Economic Times (indiatimes.com) Y2K23’s…

The post Things worth reading: 6th February 2024 appeared first on Chris Skinner’s blog.

Who invented WiFi?

https://thefinanser.com/2024/02/who-invented-wifi/?utm_source=rss&utm_medium=rss&utm_campaign=who-invented-wifi

Historically, there are some technology stories that stand out. Alan Turin; Tim Berners-Lee; Bill Gates; Mark Zuckerberg; Jeff Bezos; Elon Musk … but what about Hedwig Kiesler?

Shared extensively on social media, her story is all about the invention of WiFi. If you Google who invented WiFi? the name that comes back is John O’Sullivan (an Aussie guy who created WiFi in the 1970s) but, if you go back in time, there’s a woman who was hugely influential in this space. Her name was Hedwig. Here is her story (stolen from Facebook).

In 1933, a beautiful, young Austrian woman took off her clothes for a movie director. She ran through the woods, naked. She swam in a lake, naked. Pushing well beyond the social norms of the period. The most popular movie in 1933 was King Kong. But everyone in Hollywood was talking about that scandalous movie with the gorgeous, young Austrian woman.

Louis B. Mayer, of the giant studio MGM, said she was the most beautiful woman in the world. The film was banned practically everywhere, which of course made it even more popular and valuable. Mussolini reportedly refused to sell his copy at any price.

The star of the film, called “Ecstasy,” was Hedwig Kiesler. She said the secret of her beauty was “to stand there and look stupid.” In reality, Kiesler was anything but stupid. She was a genius. She’d grown up as the only child of a prominent Jewish banker. She was a math prodigy. She excelled at science. As she grew older, she became ruthless, using all the power her body and mind gave her.

Between the sexual roles she played, her tremendous beauty, and the power of her intellect, Kiesler would confound the men in her life including her six husbands, two of the most ruthless dictators of the 20th century, and one of the greatest movie producers in history. Her beauty made her rich for a time. She is said to have made – and spent – $30 million in her life.

Her intellect was the source of her greatest achievement, and the impact of her invention continues to influence the present world.

You see, this young Austrian starlet would take one of the most valuable technologies ever developed right from under Hitler’s nose. After fleeing to America, she not only became a major Hollywood star, her name sits on one of the most important patents ever granted by the U.S. Patent Office. Today, when you use your cell phone or, over the next few years, as you experience super-fast wireless Internet access (via something called “long-term evolution” or “LTE” technology), you’ll be using an extension of the technology a 20-year-old actress first conceived while sitting at dinner with Hitler.

At the time she made Ecstasy, Kiesler was married to one of the richest men in Austria. Friedrich Mandl was Austria’s leading arms maker. His firm would become a key supplier to the Nazis. Mandl used his beautiful young wife as a showpiece at important business dinners with representatives of the Austrian, Italian, and German fascist forces. One of Mandl’s favourite topics at these gatherings – which included meals with Hitler and Mussolini – was the technology surrounding radio-controlled missiles and torpedoes.

Wireless weapons offered far greater ranges than the wire-controlled alternatives that prevailed at the time. Kiesler sat through these dinners “looking stupid,” while absorbing everything she heard. As a Jew, Kiesler hated the Nazis. She abhorred her husband’s business ambitions. Mandl responded to his wilful wife by imprisoning her in his castle, Schloss Schwarzenau. In 1937, she managed to escape. She drugged her maid, snuck out of the castle wearing the maid’s clothes and sold her jewellery to finance a trip to London.

(She got out just in time. In 1938, Germany annexed Austria. The Nazis seized Mandl’s factory. He was half Jewish. Mandl fled to Brazil. Later, he became an adviser to Argentina’s iconic populist president, Juan Peron.)

In London, Kiesler arranged a meeting with Louis B. Mayer. She signed a long-term contract with him, becoming one of MGM’s biggest stars. She appeared in more than 20 films. She was a co-star to Clark Gable, Judy Garland, and even Bob Hope. Each of her first seven MGM movies was a blockbuster. But Kiesler cared far more about fighting the Nazis than about making movies.

At the height of her fame, in 1942, she developed a new kind of communications system, optimized for sending coded messages that couldn’t be “jammed.” She was building a system that would allow torpedoes and guided bombs to always reach their targets. She was building a system to kill Nazis. By the 1940s, both the Nazis and the Allied forces were using the kind of single frequency radio-controlled technology Kiesler’s ex-husband had been peddling. The drawback of this technology was that the enemy could find the appropriate frequency and “jam” or intercept the signal, thereby interfering with the missile’s intended path.

Kiesler’s key innovation was to “change the channel.” It was a way of encoding a message across a broad area of the wireless spectrum. If one part of the spectrum was jammed, the message would still get through on one of the other frequencies being used. The problem was, she could not figure out how to synchronize the frequency changes on both the receiver and the transmitter. To solve the problem, she turned to perhaps the world’s first techno-musician, George Anthiel.

Anthiel was an acquaintance of Kiesler who achieved some notoriety for creating intricate musical compositions. He synchronized his melodies across twelve player pianos, producing stereophonic sounds no one had ever heard before. Kiesler incorporated Anthiel’s technology for synchronizing his player pianos. Then, she was able to synchronize the frequency changes between a weapon’s receiver and its transmitter. On August 11, 1942, U.S. Patent No. 2,292,387 was granted to Antheil and “Hedy Kiesler Markey,” which was Kiesler’s married name at the time.

Most of you won’t recognize the name Kiesler. And no one would remember the name Hedy Markey. But it’s a fair bet than anyone reading this post of a certain age, will remember one of the great beauties of Hollywood’s golden age – Hedy Lamarr. That’s the name Louis B. Mayer gave to his prize actress. That’s the name his movie company made famous. Almost no one knows Hedwig Kiesler – a/k/a Hedy Lamarr – was one of the great pioneers of wireless communications. Her technology was developed by the U.S. Navy, which has used it ever since.

You are probably using Lamarr’s technology, too. Her patent sits at the foundation of “spread spectrum technology,” which you use every day when you log on to a wi-fi network or make calls with your Bluetooth-enabled phone. It lies at the heart of the massive investments being made right now in so-called fourth-generation “LTE” wireless technology. This next generation of cell phones and cell towers will provide tremendous increases to wireless network speed and quality, by spreading wireless signals across the entire available spectrum. This kind of encoding is only possible using the kind of frequency switching that Hedwig Kiesler invented.

It’s amazing the things you discover in history that have shaped our present. What will you do today to shape our future? Meanwhile, for more on this story, checkout Deadline.

Things worth reading: 5th February 2024

https://thefinanser.com/2024/02/things-worth-reading-5th-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-5th-february-2024

Things we’re reading today include …

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

The Finanser’s Week: 29th January – 3rd February 2024

https://thefinanser.com/2024/02/the-finansers-week-29th-january-3rd-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=the-finansers-week-29th-january-3rd-february-2024

This week’s main blog discussions include …

How digitalisation is changing lending

I was recently having a chat with my old friend Slava Solodkiy about the way in which digitalisation is changing lending. He then surprised me by summarising our discussion and allowing me to share it here! Here’s his write-up: How digitalisation is changing lending When thinking about this my brain thought linearly – taking current…

Focus on needs, not wants

I got this sign the other day, and it really resonated. I guess it resonated as, for nearly all of my life, I’ve had wants. It’s a terrible disease, as needs is far less serious. Wants is that there’s always something you want but cannot have. As a result, you work as hard as you…

Creating the world that is the best it can be

Attending a dinner with family the other night, we got into a kind of argument or debate that had me in one corner as the boomer and my friend, a young parent, as GenZ. It was a heated debate and I don’t think either of us won. What do you think? Summarising the discussion, I’ll…

We are all just prisoners here, of our own device …

I just found a fascinating report from data.ai about the state of mobile usage today. Apparently we spend a third of the day, on average, playing with our phones. The mobile economy is now worth more than half a trillion dollars; with most of it generated through spending on mobile adverts; and almost 500,000 apps…

Fintech Islands – a great experience for both business and pleasure!

Over the past few years, I’ve been to many fintech events around the world, from London to Las Vegas; Sydney to Singapore; and even Kigali to Karachi; but last week was a first, for me, Fintech Islands in Barbados. Well yes, someone had to go I guess and so, when asked, how could I resist?

Things worth reading: 2nd February 2024

https://thefinanser.com/2024/02/things-worth-reading-2nd-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-2nd-february-2024

Things we’re reading today include: $112 million stolen from founder of Ripple cryptocurrency platform (therecord.media) My first boss: Jaidev Janardana, Zopa Bank CEO (yahoo.com) ‘Circular economy’ fintech Twig closes after raising £32m (uktech.news) Why one San Fran fintech snubbed Nasdaq for the London Stock Exchange (cityam.com) How Lithuania became a fintech hub in Europe –…

The post Things worth reading: 2nd February 2024 appeared first on Chris Skinner’s blog.

How digitalisation is changing lending

https://thefinanser.com/2024/02/how-digitalisation-is-changing-lending/?utm_source=rss&utm_medium=rss&utm_campaign=how-digitalisation-is-changing-lending

I was recently having a chat with my old friend Slava Solodkiy about the way in which digitalisation is changing lending. He then surprised me by summarising our discussion and allowing me to share it here!

Here’s his write-up:

How digitalisation is changing lending

When thinking about this my brain thought linearly – taking current practices and processes in lending, and thinking from the perspective of ‘how to improve them – but then I asked my brain to fantasize more radically: what is currently falling out of the lending market, and digitalisation could not just ‘improve’ processes, but also change the market, adding parts (and participants) that are currently falling out.

How easy, fast, and convenient is it to find the “Cancel?” button on your website or in your app? The first and simplest thing I thought about – how many lending services have a dedicated product owner for clients who want to opt out of a loan, make it convenient to repay a loan early (and do they have KPIs and measure NPS in this direction?), or overall: if a person (or company) can’t repay a loan on time (life happens, right?), then who tries to make the process convenient, so it’s emotionally and technically easy for the person to inform the creditor (rather than hide), and get adequate support? Everyone thinks about onboarding – does anyone think about the convenience of offboarding? For example, my friend Alina works at Tesla only on the product for returning a car if you don’t like it, or you change your mind, or it has a technical issue: I believe in Tesla because they care not only about selling you a car but also about making its return convenient.

There’s still no convenient online lending service for refinancing loans, especially when you’re facing financial problems. You or your company might face the inability to repay a loan on time for 99 reasons – and this says nothing about us as borrowers wanting to be conscientious and repay the debt on time! As Mark Twain wrote, “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.” Without feeling ashamed or fearing retaliation – how do you tell this to the creditor? How do you get products that consolidate loans, lower the monthly rate, extend the term, and provide credit holidays for a month or two?

TWAIN PIC

Blue ocean: “Revolut for” bankrupts. Everyone prefers to tread the beaten path – and fight for the same (red ocean) audience: borrowers with a high credit score. In the United States, the number of personal and business bankruptcy filings experienced a 10% increase in the twelve-month period ending June 30, 2023, compared to the previous year. Specifically, there were 418,724 bankruptcy filings during this period, with 15,724 being business filings and 403,000 being non-business filings. For instance, in 2019, there were 777,940 filings, which is almost the combined total of filings for 2021 and 2022. The number of filings decreased by 30% in 2020, reflecting the initial impact of the COVID pandemic. In the United Kingdom, in December 2023, there were 6,584 individual insolvencies, which was 20% lower than in December 2022. This decrease was primarily due to a decline in the number of Individual Voluntary Arrangements (IVAs), while Debt Relief Orders (DROs) and bankruptcy numbers increased. Specifically, there were 2,472 DROs and 496 bankruptcies in December 2023. The bankruptcies consisted of both debtor applications and creditor petitions, with both categories showing an increase compared to December 2022. But – what about online services that help you properly file for personal (or business) bankruptcy? What about a bank for people with a poor credit history – how to help them fix it? Such people fall into the same “loop” as former prisoners – the system, instead of correcting and helping them return to normal life, repeatedly punishes them, forcing them deeper into the credit pit (most crimes are committed for the second or more times).

“Brex for founders and employees with options.” A lender for founders from founders, where clients – you are a co-founder or employee with shares or option stocks from a B+ round tech startup. In Revolut alone, there are several hundred employees with options from $100,000 – how many (tens of) thousands of such clients with pain: you want to buy a home (or a car), but banks are not able to use your stocks as part of the analysis of your wealth and collateral, and your salary isn’t enough to buy something that you really want. What about such a lending solution: we whitelist everyday B+ round startups from Crunchbase with strong traction, investors composition, funding – find your startup in our list or add it manually for our immediate analysis. You provide information about the number of shares you own – and we give you an answer with a pre-approved credit line (with some discount to your shares’ price) to be used for car or home purchases. Maybe to implement at some moment: that you pay only interest rates (from your salary), and do full repayment for the “body” of the loan, only when your shares will be realized (exit or buy out). The whole magic is in target clients: “sit on the tail and parasitize” on the growth of the tech startup industry. And – double collateral: the main problem with all online-lenders are high cost-per-acquisition and high default rate – we can provide high tickets with extremely low risk (because of double collateral – your carhome and your shares). Also, we can connect you with potential buyers: most often you are not able to sell your sharesoptions before the full exit (pro rata and ROFR rights), but you are able to sell the option for these stocks, – and if someone wants to buy and consolidate shares of employees, they can buy options for these stocks directly from you today .

“Brex for remote workers and digital nomads.” Due to covid and the development of remote work services a new fast-growing segment has emerged in the lending market: the audience of remote workers, employed in various companies through platforms like Deel and Papaya. Only one Deel “employs” more than 60,000 employees in some countries for more than 5,000 companies from other countries. From the perspective of traditional creditors, everything is unclear here: the borrowers themselves are from one country (for example, Poland), live in another (for example, in Indonesia’s Bali island or Thailand), are formally employed in the American-Israeli Deel, but in reality, in some fast-growing startup in the USA or the UK. Who will credit them? The average salary of “employees” at Deel starts from $5,000 per month (mainly this is outstaffing of programmers and engineers). And they face such pain: if you need a loan or credit card – for banks and online lenders, it is quite new and difficult to understand such type of employment. Especially if you hold a passport of one country, live in another one, and your employer is in a third one: no chance to be approved. How about a solution: sign up with your DeelPapayaetc login – and link with your profile, and we “withdraw” your work contract, size of salary, etc, and provide you pre-approved cross-border loan or credit card. Here magic is in the target audience too: “sit on the tail and parasitize” on the rapid growth of such startups like Deel and their audience. And – risk assessment not per customer only, but per Employer too (we whitelist everyday companiesstartups using Deel&Co for outstaffing with strong traction, investors composition, funding – find your startup in our list or add it manually for our immediate analysis). High average check, unlike other creditors or digital banks. Then you can develop further: in lending – from consumer to cards, then to auto and mortgage, and in banking: strive to “capture” more and more money flows, become its main account.

Lending digital identity – re-usable KYC. Here simple logic – aren’t you tired of filling out the same data every time? When will users of credit services “vote” against current providers and for not being tortured with the same questions and answers! As David Birch recently wrote: “Every time I interact with a new financial institution, accountant, lawyer or business partner I find myself having to email scans of utility bills, pictures of passports and (and this continues to astonish me) PDFs of corporate letterhead in order to get anything done. This is an incredible friction in the economy, a waste of time and money for all concerned.”

From my own user experience, I would, perhaps, highlight among the latest online (and traditional) credit services that I constantly test – I would single out CapitalOnTap (for UX and quality of customer support) and YC-backed Maroo (the guys lend specifically to the wedding segment: high average check, higher than standard consumer loan or credit card, lower risks and two borrowers). Another observation – such services as Osome and Anna.money help you quickly register a new company in different countries. But – has anyone of you tried to close a company online (spoiler: it’s hell)? Now there’s a new breed of startups, those that help others close shop: with names like Sunset and SimpleClosure, these startup undertakers arrange fire sales of furniture, file final taxes and carry out other mundane work to wind down businesses.

A digibank for the era of negative interest rates and a CBDC-friendly bank. All business banks are built around the norm of positive rates. However, abnormal is the new normal, as Japan and other countries introduce negative rates to ‘burn off’ excess idle capital and not fuel inflation, has anyone thought about the business model of an online lender and digital bank in an era of negative rates? The noise around CBDC is intensifying. In my opinion, the main innovation is that central banks will be able to directly open accounts (and lend to) banks from other countries, which in turn can take and issue loans in their own country in different currencies. Is anyone thinking about a CBDC-friendly bank? The noise is intensifying – not just China, but the USA, England, even Russia, and the BRICS countries are already launching their joint bank and thinking about how to make their quasi-currency a settlement currency. You can suggest to all the states planning to pilot this that there is a bank for testing. And to all users who want to be the first to try it out – as soon as they are available, they will be the first with you.

Compliance from fraudsters, risks from bankrupts. Everyone has seen movies where the FBI or other special services get tired of chasing a hacker and eventually offer them to switch sides and help them catch other hackers and criminals. So why don’t compliance departments employ those who have been convicted (or are currently in prison) for ‘money laundering’? They know about compliance and will immediately identify suspicious patterns much better than any of your specialists. The same goes for risks and creating new credit products – don’t ask for ideas and advice (including mine!) from pampered business school graduates sipping 18-year-old whiskey in a vintage leather chair and recommending to each other to ‘step out of their comfort zone.’ Ask those who are deeply and for a long time in the discomfort zone!

‘Brex for retail traders’. Lending against trading positions – quick consumer, auto, and mortgage loans against the value of your trading portfolio (at any popular online broker). Imagine you have an account on Robinhood, Revolut trading, eToro, Webull, Moomoo, etc. (Coinbase, Binance, Kraken too?) – you need a quick loan for a car or mortgage, but you believe in your trading position and don’t want to close it, and don’t want to fill out extra paperwork for the classic loan scenario (and banks/creditors don’t consider your brokerage accounts as part of your financial state/income – only salary and bank account). As a credit solution: you link your brokerage accounts through APIs/Plaid/etc. (eventually – we can do scraping and login emulation, such services are much fewer than banks) to your account with us: we immediately open an account for you and show how much we are ready to lend you instantly against stocks (with accrual to our account). The main magic for investors is: better risk management – due to double collateral, as online lenders have two problems time and again (and here they turn into two advantages!): risk management and how to reduce it (the service has double collateral for auto and mortgage) and customer acquisition cost and how to reduce it (the service ‘rides the tail’ of the growth of Robinhood, Revolut trading, eToro, Webull, Moomoo, etc.). And also – a high average check, unlike other creditors or digital banks, plus in lending pre-approve always works well (whatever you do and at whatever rates you sell – even if they are more expensive than the market). In the future, it might be possible to lend against the collateral of crypto and tokens, and also strive to ‘capture’ more and more cash flows of the retail investor, become their main account, diversify their assets (real estate, stocks, artwine, NFTs, other assets – all in one app): to become a digital private banking app, like ‘Revolut for HNWIs‘. Or become a broker eventually (seeing trading positions at different brokers, lending to them, and offering the client to transfer the portfolio to yourself for some bonus when he gets used to you) – and cannibalize his assets from other platforms to yourself.

Online platform for signing and issuance (and tokenisation) of IOUs (an IOU is a document acknowledging a debt: IOU is a phonetic version of the words “I owe you”). The market for lending to each other offline in the old-fashioned way is still huge, despite the growth and penetration of banking and fintech players. There is an urgent need in the field of financial literacy: to properly (easily and quickly) issue such an IOU (from whom, to whom, when, how much, for what term, etc.). A kind of simplest ChatGPT (to draft the simplest legal contract) with PandaDoc (to legally sign it) and Notarize.me (to notarize it in the presence of an independent participant). And – tokenize it: then these assets (in the form of debts to you) you will be able to add and account for in your financial position, pay with IOUs or take loans against them, see them in the dashboard of your Revolut through integration with Plaid. Sounds simple enough – but it’s a fundamental shift: we democratize the bond market – everyone is the central bank now! Bond issuance is currently the prerogative of large corporations, and we automate the issuing (and tokenization) of bond issuance – for private clients, as well as small and medium-sized companies, acting as a ‘notary’ or ‘verifier’ of issuance and a marketplace for distribution. After all, what is money? It is a debt note, a promise to provide services or produce goods in the future. Take a cue from any central bank – there’s no point in paying off the debt (the US Federal Reserve is not reducing and not striving to pay off its rapidly growing debts), it makes sense only to service it (and increase it).

Person-to-state lending platform – a platform for lending to cities, regions, countries. If you learn how to issue credit notes between private individuals (offline and online), then it’s a short step to issuing municipal, regional, and national bonds – a sufficiently large, old, and untapped market: transfer it online, give it more transparency, give access to private investors. Some municipalities (see examples in the USA) are ready to borrow in crypto, just in case. What if instead of helping Ukraine and Israel in the form of charity (tens or hundreds of dollars or pounds as donations), you are given the opportunity to lend them thousands or tens of thousands? They get more money, you provide more support in the end, and don’t lose your money.

 

Who is Slava Solodkiy?

Vladislav Solodkiy is one of TOP35 the most influential fintech-investors in the world (by Institutional Investor magazine), TOP21 fintech influencers in Europe (by Fintech Magazine) and TOP100 fintech ecosystem builders in Asia (by NextBank and E&Y). Also, as an fyi, Slava wrote a fascinating insight about the Revolut Mafia the other day.

 

Focus on needs, not wants

https://thefinanser.com/2024/02/focus-on-needs-not-wants/?utm_source=rss&utm_medium=rss&utm_campaign=focus-on-needs-not-wants

I got this sign the other day, and it really resonated. I guess it resonated as, for nearly all of my life, I’ve had wants. It’s a terrible disease, as needs is far less serious. Wants is that there’s always something you want but cannot have. As a result, you work as hard as you can to get what you want and then, when you’ve got it, you look for the next want.

Wants is bad.

As an older man, I look back and think about the fact that I’ve always been quite well off, but never knew it. The reason I never knew it is that there were always things that cost, and I could never afford them. The mortgage would be a biggie, as would the car purchase, but there are many others. Educating the kids, having a good holiday once or twice a year, paying living bills for energy and insurances, and so on and so forth. Very little was left at the end of each month for pure spending and, what was, went on wants.

Buying rare art and books, investing in crypto, looking at property portfolios and such like became the obsession. As a result, after all these years, I have all those books, investments and more, but does it make you happy? Not really, as the happiest experiences are with family.

With family, you have all you need. That’s why the sign made me think, once more, that life is about making the best of everything you’ve got and not the things you want. In fact, in a similar vein, the law of diminishing returns means that the more you want and get, the less satisfaction. The first time you snag that rare artwork at auction is great! The second time is good. The third time starts a routine. The tenth time, you don’t really care anymore. It’s just for a short adrenalin rush.

This really came home to me recently as I now have two homes: one I don’t want in the UK; and the one where I live in Poland.

The house in the UK is full of all sorts of memorabilia that I collected but, tbh, cannot remember what half of it is. The house in Pioland is full of family memories with my wife and kids, and regular visits from cousins, parents, aunts, uncles and well, family.

What would you rather have: the things you wanted or the family you love?

It all comes back to a conversation I had many years ago when arguing with my then partner about my career focus. I was busting a gut to pay the mortgage and bills and earning enough to just get by. She turned to me halfway through the conversation and said: who do you want to attend your funeral because, at this rate, it won’t be us … will your work colleagues be there?

I guess it’s a similar thought that inspired Charles Dickens to write A Christmas Carol. You can be a Scrooge – a pure money-making work machine with no heart – or you can be a Bob Cratchit, with family and love bursting out of every pore of the house.

Anyways, sorry for this reflective thought, but the holiday season brings home truths. Therefore, in the strict belief that New Year resolutions are never kept, my general aim is to spend more time making memories with my family and friends. What’s yours?

Things worth reading: 1st February 2024

https://thefinanser.com/2024/02/things-worth-reading-1st-february-2024/?utm_source=rss&utm_medium=rss&utm_campaign=things-worth-reading-1st-february-2024

Things we’re reading today include: How HSBC became the world’s most accident-prone bank (telegraph.co.uk) Shares plunge for saviour of failed Signature Bank (ft.com) How bots and short sellers brought down First Republic Bank | Daily Mail Online Augmentum CEO Tim Levene: ‘A lot of Fintech AI is a bubble’ (citywire.com) UBS-backed fintech Fnality eyes US…

The post Things worth reading: 1st February 2024 appeared first on Chris Skinner’s blog.