Heard of “CTRL + AI”?

Banks are going all in on AI...but do they really know what they’re doing?

Greetings, fellow fintechers!?

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When it comes to AI, there’s a lot of focus on the intelligence part – and less on the artificial bit.?

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But do things artificially, and you’re bound to hit some less-than-artificial consequences.?

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That’s the warning regulators are offering banks across the globe.?

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And speaking of globe, fintechs are finding creative ways of increasing their global footprint – whether it’s Apple’s oh-so-generous offer to open its NFC payment tech to competitors, or Klarna’s dollar-spangled credit card plans in the U.S.?

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What you need to know right now:?

Banks told to anticipate risks from using AI, machine learning (Reuters)?

Regulators are warning banks on the risks of diving into AI without the proper know-how or strategy.?

"My main message is that the use of AI in banking raises important prudential and financial stability challenges," said Bank of Spain Governor Pablo Hernandez de Cos on the topic.?

De Cos, who also chairs the international Basel Committee on Banking Supervision, added that "Left unchecked, such models could potentially amplify future banking crises."?

Why does this matter??

According to a report by McKinsey, AI can add between $200 and $340 billion in value per year for banks – around 9-15% of their operating profits.?

Needless to say, there’s a reason banks are putting on their artificially intelligent thinking hats...?

Some examples:?

• Wells Fargo recently partnered with fintech TradeSun to leverage its AI platform and improve its own trade finance and compliance processes.?
• Last year, Morgan Stanley launched an AI assistant, modeled after ChatGPT to act as a sort of finance encyclopedia for its customers.?
• J.P. Morgan continues to top the list in AI investments among banks – pouring endless resources into hiring AI talent and investing in AI innovation.?

With developments like these, the message is clear:??

It’s all fun and games until someone loses an (AI)ball.?

What else to read:?

Revolut Investor Says FinTech’s Value Has Jumped 45% (PYMNTS)?

• Revolut investor reports a 45% increase in the company's valuation since last year.?
• With Schroders recently raising stakes, Revolut is reportedly now valued at $25.7 billion, up from $17.7 billion last year.?
• Factors contributing to growth could include international expansion and the new services added.?
• Despite the jump in value, concerns still persist about profitability and regulatory hurdles.?

Apple's offer to open up NFC payment tech to be approved in EU: report (Seeking Alpha)?

• Apple's offer to open its NFC payment technology to rivals may soon be approved by regulators in Europe.?
• The offer includes a 10-year commitment allowing third-party mobile wallets access to Apple's payments chip on iPhones, access to authentication features, and free NFC functionality on iOS devices – among other things.?
• The European Commission invited comments on Apple's commitments to address competition concerns.?
• The Commission had informed Apple in May 2022 of concerns that its conduct may restrict competition in the mobile wallets market on iOS devices.?
• Apple Pay operates exclusively on iOS devices, forming a closed ecosystem controlled by Apple.?

Klarna credit card launches in the US as Swedish fintech grows its market presence (TechCrunch)?

• Klarna launches its credit card in the United States, offering consumers the option to pay in instalments, similar to its buy now, pay later model.?
• Users can earn up to 10% cash back on selected merchants when using the card in its app, with no annual fee or foreign transaction fees.?
• The card integrates with Klarna's AI assistant to find deals on planned purchases and is compatible with Google and Apple Pay.?
• Customers can join a waitlist for the card, which will be rolled out in the coming months, and can be used to pay for purchases either in stores or online.?
• Klarna also aims to offer payment flexibility without encouraging revolving credit.?
• The company’s success in the U.S. market has led to the country becoming its largest market by revenue, with over 37 million users as of last November.?

Chinese fintech Ant Group targets global growth after Jack Ma’s exit (Financial Times)?

• Ant Group, the Chinese fintech company, is targeting global expansion following Jack Ma's exit and a regulatory crackdown.?
• Ant Group's $37 billion IPO was halted in 2020, leading to a restructuring and a significant drop in its value.?
• Despite challenges, Ant is now focusing on global growth, highlighted by its bid for Credit Suisse's Chinese securities unit and efforts to expand its international payments business.?
• The company's financial services sector has faced increased regulation, leading to a decline in profits, but it is now shifting its focus to its international payment division.?
• Ant Group's CEO, Eric Jing, is leading a global roadshow to promote the company and has made structural changes to its overseas payment business to operate independently.?
• Ant Group's payment network now connects millions of merchants and consumers worldwide, signalling its commitment to global expansion.?
• Questions remain about Ant Group's future profitability and corporate governance without Jack Ma's leadership and amidst regulatory pressures on its consumer lending business.?

That's all for this edition. See you next time!