Fintech Triple Roundup: Risk Management, PR Tactics, and GenAI Models
I’ve been told it's been slow while I was on my annual digital detox. It`s refreshing to come back to Fintech land wondering whether I missed a landmark event or an omen of an imminent black swan event. One thing that hasn’t changed is the sentiment of increased uncertainty, scary geopolitics, and complex interconnectedness.
Enjoy my returning Fintech cherry picking:
The Jackson Hole gathering and Powell`s speech on Friday are all the rave this week as they affect interest rates, monetary policy, investment strategies, and last but not least capital expenditures.
The topic of risk management and growth in financial services is most relevant than ever. Since the Silicon Valley Bank crisis (March 2023) it has become clear to everybody that increased Operational risks plague banking in addition to Market and Compliance Risks. This is a fact independent of where banking services are delivered — by licensed banks or embedded in non-financial businesses. On this topic, I highly recommend listening to my discussion with Michal Cieplinski (founder and CEO of Capstack.ai) recorded following the SVB collapse but still very relevant, as loan and deposit concentration risk in banking persist and are plagued by manual processes, lagging data and therefore, inefficient risk management — Full discussion 9 Key Insights to De-Risking Banks & a Fintech Solution.
Video highlight:
I am also looking forward to catching up with the Fintech Business weekly podcast on the topic of Balancing Growth With Risk In The Post-ZIRP Era — A Jason Mikula conversation with Frank Rotman, Jason Henrichs & Matthew Lifshotz.
I wasn’t surprised that Revolut, Nubank, and Klarna continued to dominate headlines during the summer slowdown.
Klarna`s new personal account and cashback rewards offering is a classic Fintech newsworthy offering. `Klarna takes on banks`, `Klarna jumps into banking`, `Klarna is looking more like a traditional bank` are all classic misleading Fintech PR headlines. Once I looked into the new Klarna offerings, the headlines should have been `Klarna is copying Starbucks card` and hoping to be as successful in holding customer deposits on its balance sheet (earning up to 5%) and paying nothing to users. This is actually a KlarnaBucks offering and its success should be benchmarked with that of Starbucks which was launched in 2001 and currently has c. $1.8bn in unredeemed customer cash!
I was relieved to catch up on some sensible reporting on the evolving General Purpose Technology — GenAI — .
Selling access to LLM models via APIs is quickly becoming a “zero margin business”, according to Aidan Gomez, CEO of Cohere.
The TechCrunch article What margins? AI’s business model is changing fast, says Cohere founder is a must-read. We all need to be aware that
- All AI models are currently losing money because they need more compute and there is fierce competition
- Big Tech cloud providers can afford this. Acquihires continue. It is unclear if anyone will be left to survive as a standalone business.
Meanwhile, JP Morgan is committed to integrating the latest tech advancements and has rolled out LLM Suite in collaboration with OpenAI’s LLM. This suite is for internal use only and is geared towards productivity efficiencies of its employees. We will have to wait and see whether JP Morgan employees will be disappointed or empowered by this co-pilot design.
The JP Morgan LLM Suite business ROI will be difficult to decipher.
Conclusion
Financial services continue to navigate a period of significant transformation, driven by the need for effective Risk Management, Strategic Positioning and Communication, and adaptation to New Technological paradigms. These are areas that affect all players involved in financial services, whether they are Traditional players (incumbents), Digital — natives (Fintechs), or licensed or non-financial businesses with financial embeddings.
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`Thinking Like an AI-Native` is one of the chapters that I have co-authored with Hari Abburi
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