Fintech Digest from Autonomous ?NEXT -- How Creative Artificial Intelligence Can Lie; Is Crypto for Machines?; Amazon Lex in Wealth & Banks

Hi fellow futurists -- here are our top 3 favorite thoughts:

Crypto is for Machines.  

Just because the ICO market is red hot, doesn't mean every component of it makes sense. Depending on time horizon and risk tolerance, capital allocators should think about whether they are investing in a short-term financial sentiment play, or a long term infrastructure play. And as more and more traditional money moves into the ecosystem, parsing out things that are transformative from those that are fashionable is important. We are working on separating out these issues. Perhaps the value is just decentralization and privacy from sovereigns. But that is like saying the Internet is for websites. 

So one clear short-term trend is traditional institutional investors looking for exposure to the cryptoeconomy. Symptoms include asset managers like Van Eck filing with the SEC to create Bitcoin ETFs, venture capital funds partnering with Blockstack to create a$25 million fund, the creation of Coinlist by Protocol Labs and Angellist, North Capital's Proof Ethereum Reg D offering, and a variety of others. Wealth managers, family offices, broker/dealers, traders are all looking for crypto-exposure as a response to the ICO boom. And that's just public knowledge. There's likely much more demand privately -- so much so that an insider like Ryan Selkis of Coindesk / Digital Currency Group thinks that the rush into crypto-hedge funds is a disaster waiting to happen.

Our initial intuition is that much of the cryptoeconomy is not for people, but for machines. In a world where most work is done by automation, human interactions with blockchained ecosystems isn't particularly important. However, machine-to-machine interactions on the Internet of Things is a massive problem at scale. We haven't even seen the start of it. To that end, projects like District0x (which we don't hold or endorse) are interesting at a conceptual level. Perhaps this is just crypto marketing mumbo-jumpo, but the idea of a platform for spinning up decentralized autonomous organizations that use Ethereum, Aragon and IPFS fits our Accelerando thesis. Or see this talk on the "Machine Payable Web" by 21 Inc, a place where financial hive-minds and Amazon borganisms can evolve to compete with Uber Eats.

Surce: 21 Inc

Amazon Lex for Wealth Management & Banking. 

We believe that bank-as-a-platform is inevitable for any meaningful financial institutions, and that it is more likely to be a narrow, utility-like platform than the dominant iPhone app store. A strong enterprise tech platform like Amazon is the main vector that would compress financial institutions from large manufacturers and distributors to regulator-facing APIs.

In wealth management, roboadvisor Betterment uses 20 different applications on AWS. In this excellent article, Financial Planning discusses how Amazon's conversational interfaces can become prevalent across the industry. What starts as a conversation about payments can turn into a conversation about financial products, planning, investing, trading and retirement. And talking, or even chatting, is far more natural than thumbing through buttons on the glass screen of your phone. But perhaps advisors can use the technology to their advantage, or build skills and applications to live in the Amazon ecosystem.

In banking, take a look at ING, and its vision of voice-activated digital assistants. The combination of open banking mandated by European regulation PSD2 (i.e., all banks have open APIs) and natural language processing means that data is free. Building the first voice-based financial data aggregator can create a lead generation engine for deposits and lending. Or it can commoditize all financial product manufacturing.

Source: Amazon

How Creative Artificial Intelligence Can Lie. 

Once in a while, we can't help coming back to this rhetorical question -- Can AI ever be creative? This week saw a return of interest to the field of deep dream and deep style, which is the use of neural networks to hallucinate art, music, and poetry. The New York Times walks through the basics of how computers can do this, sharing Google's project Magenta, NSynth, Sketch-RNN and others. Another example is a viral art app called Prisma, which lets users apply artist filters on top of their own photos, now planning to provide its image recognition software as a private label service to businesses.

So two things to think about as it becomes more obvious that computer vision works, and that it can be creative. The first is that we can no longer trust what we see. Neural networks can be used to manufacture not just weird artifacts and copy Picasso's style. They can also be used to manufacture voices and videos. See this article for multiple examples of synthesized videos of world leaders (e.g., Obama) delivering a variety of real and manufactured messages. To doctor a video and spread misinformation, using perhaps a Twitter bot army,  will become trivially easy in the next 3 years. How does this impact finance? Think of all the things robot Warren Buffet could be made to say.

Second, this can be used to break the machine vision claims processing software that are being built by Insurtech companies. We've talked before about how photos of damage can be read by machines, and save operating costs of sending out claims assessment professionals. See here for a clear example how this technology works and "sees" damages. How hard would it be to hallucinate damages where there are none? Creative AI is merely the reciprocal of machine vision. Companies like Nationwide and Ping An, spending millions on insurtech solutions, should beware of such exposure.

Source: NYTimes, Google

Thanks for reading!

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