Will a boom follow Covid-19?

Many people must be wondering what the rest of this decade might look like after such a disastrous start to the 2020s. Can we look back at history and see a trend? For example, the 1920s that followed World War I and the Spanish flu epidemic was a Golden Age when economic growth surged, society relaxed a lot of its restrictions, women cut their hair for the first time, all of it captured and portrayed in F. Scott Fitzgerald’s ‘The Great Gatsby’. Now there’s a book that has never gone out of fashion.

This week I read an article by Rich Karlgard in Forbes that is written from the optimist’s viewpoint. He believes there are four possible reasons that the 2020s might be another 1920s, although he does so with caution.

Digital tech will accelerate

There is no doubt that the pandemic made all things digital vastly more important. Otherwise, we wouldn’t have seen so much change in such a short time. Karlgard first points to the fact that back in 2017, Diane Greene, then the Google Cloud CEO, told a Forbes audience that the rate of digital technology progress was accelerating rapidly. But that does not necessarily bring productivity along with it, because the business model needs to change for that to happen. Then along came Covid-19, which forced a rapid business change. Microsoft CEO Satya Nadella has said that five years of digital transformation had taken place in six months, all because businesses needed to work smarter, faster and be more nimble.

Artificial Intelligence is now scalable

A number of digital technologies reached maturity at the same time: cheaper cloud computing, universal digital computing and faster telecoms with the arrival of 5G. And then there is Artificial Intelligence (AI). Karlgard says this will be the decade of enterprise AI, and that’s spot on. Prior to 2020 using AI was hard, labour-intensive, expensive work, but now it is very much easier to use and it is going to transform many areas of industry, from logistics to customer service.

We’re awash with capital

Although it may not always be obvious the world is swimming in capital right now, which makes it easier for start-ups to get the funding they need. Investors have their eyes on digital technology and AI products, because as Karlgard says, “thy know they are game changers.” He adds, “These will disrupt business models and markets, and power enormous fortunes.”

Revolutions in the physical world

We are not talking about physical revolutions here; but revolutions in the way aspects of the physical world are being changed by technology. For example, autonomous trucks don’t need to take rest breaks, drone cameras can improve agricultural crop yields, and gene sequencing combined with AI can create personalised medical treatments.

However, whilst all these may lead to a boom after what feels like a bust, if we look back at the 1920s, we must note that while cities grew and grew, rural areas were not invited to the party, creating a divide that lingers to this day. The 1920s also experienced a stock crash in 1921 that almost buried the decade, followed by the more famous Wall St crash of 1929. So, even the Golden Age had its downsides. Still, after our experience of 2020-21, one that has been globally shared, let’s focus on optimism and the way in which the Covid-19 pandemic has accelerated digital technology for our benefit and forced us to be more agile.

UK is the winner in European fintech funding

Perhaps this news will perk up those England supporters who are living with defeat to Italy at Euro2020, especially if they also happen to be fans of the fintech industry. The UK Fintech State of the Nation report from Innovate Finance shows that London “has cemented its position as the fintech capital of Europe,” despite the double whammy of a global pandemic and Brexit.

According to the data in the first half of 2021, the UK fintech sector raised $5.7bn. This is 34% higher than the $4.3bn raised in 2020 and breaks the 2019 record of $4.6bn.

Who benefited from this rush to invest in UK-based fintechs?

SaltPay and Checkout.com attracted the two largest deals made this year, with $500 million and $450 million respectively. At the moment these are the biggest fintech investments ever in the UK. SaltPay is focused on building a better payments system for merchants, whilst Checkout.com is a global payments platform aimed at offering more payment methods and currencies for online businesses. They’re similar but different, and it is worth noting that both aim to make life easier for merchants.

Indeed, ‘payment’ platforms appear to be dominating the sector here. But challenger bank Starling also got a hefty influx of funds ($376m) and crypto trading platform Blockchain.com received $300m. There has also been significant interest in more niche fintechs, such as Smart Pension, a pension and payroll tech provider, which received $230m, and PayFit, a platform that simplifies and automates payroll and HR processes for small and medium-​sized businesses, raised $107m. Credit-scoring specialist ClearScore raised $200m, another sizeable investment,

In 2021 the number of firms making deals of above $100m also rose from 10 in 2019 to 13 in the first half of 2021, so we can expect that figure to be much higher by the end of this year, and it will be interesting to see by just how much it grows.

Of course the USA is still ahead of the UK, but it is the only country that is. The report shows the levels of support for those other countries that come closest to the two leaders during the same time period: Brazil (40 deals and $3bn), Germany (56 deals and $2.5bn) and India (132 deals and $2.2bn).

Janine Hirt, CEO of Innovate Finance, commented: “Fintech is one of the fastest-growing sectors of our economy and has a vital role to play in the UK’s economic and business recovery. It is hugely encouraging to see evidence of this resilience and growth, particularly in light of the uncertainty and challenges brought on by 2020. Both the flow of capital and a wide talent pool are essential to maintaining the sector’s strength, and we remain committed to supporting efforts in these vital areas.”

You can read the full report here.

Total anonymity or enhanced privacy for payments?

Anonymity in payments is a complicated topic with no easy answers. There are those who favour complete anonymity, and then there are those who see that position as dangerous. Even the regulators aren’t too sure about which way to turn, as evidenced in the US Government Accountability report on “Emerging Regulatory, Law Enforcement, and Consumer Protection Challenges” (May 2014). It concluded, “that virtual currency systems “may” provide greater anonymity than traditional payment systems.”

Fintech expert David G.W. Birch, who has been pondering the issue for some time, and who has a ‘pseudonymity’ solution, examines it by looking at lottery winnings. He cites the case of a US lottery winner who took a case to court (as Jane Doe) because she wanted to retain privacy about her winnings. Why was she so desperate to do that? Perhaps another case Birch tells about explains it: “In November 2015, Craigory Burch Jr. matched all five numbers in the Georgia Fantasy 5 drawing and won a $434,272 jackpot only to be murdered in his home by seven masked men who kicked in his front door.”

However, in the case of Jane Doe it is clear that even if she managed to keep her winnings private, some people would know about it, namely the lottery people and her bank. As Birch says, “Being anonymous is really difficult in an infrastructure that has no anonymity.” On the other hand, if you have an anonymous system it is relatively easy to add non-anonymity to it if desired.

So, if we are designing future infrastructures, should they allow for the kind of anonymity the lottery winner wanted? Birch gives the example of New Hampshire, which allows people to form anonymous trusts and these trusts can buy lottery tickets. However, the money still has to go to a bank account.

Cryptographics could be the answer. For example, if you win the lottery, your money can be sent to your cryptocurrency address (which is in the ticket) without the lottery owner or anyone else having the slightest idea to whom it belongs.

However, there is resistance to the idea of electronic money, and central bank digital currencies in particular, to be anonymous. But there is a case for “a privacy-enhancing digital Dollar. This would be very appealing on a global scale in contrast to digital currencies subject to continual state surveillance.”

If that can be achieved, it will be to the advantage of digital currencies.

Coded Bias: a film exploring AI

Have you seen Coded Bias, a new film from Netflix? If you are at all interested in artificial intelligence (AI), I recommend you find a way to watch it, even if you don’t have a Netflix subscription. It takes a deep dive into the state of artificial intelligence, and as Aparna Dhinakaran writes at Forbes, “the issues it confronts are uncomfortably relevant.” What she is referring to is the facial recognition programmes that have a severe algorithmic bias against women and people of colour.

MIT Media Lab researcher Joy Buolamwini says in the film, “The systems weren’t as familiar with faces like mine (as those of mostly men and lighter-skinned people),” and her research showed that Microsoft, IBM, and Amazon’s facial recognition services all have common inaccuracies.

The Netflix film examines how these inaccuracies can spread discrimination across all spheres of daily life. It also touches on other spheres of AI use where bias occurs, such as “who gets hired, what kind of medical treatment someone receives, who goes to college, the financial credit we get, and the length of a prison term someone serves.” This is not the aim of AI, which should be used to enhance opportunities and advancement for all people, particularly those most vulnerable to discrimination.

 Coded Bias tries to show us how these issues with AI can be removed, with the onus lying in looking at how AI leverages data and how it is developed, deployed, and used. The film’s director, Shalini Kantayya said, “This is a moment where we are all in a lot of pain. This moment is asking us to drop into a deeper place in our humanity to lead.” She also attempts to shine a light on why better AI solutions should be focusing on protecting those communities that stand to be harmed the most by it.

One way forward is to look at the innovations in AI/ML (ML is machine learning). These will change how AI models are observed and measured to ensure fair, ethical, and absent bias. There is also a need to deliver AI systems that have better tools for accountability.

We live in a time when socio-economic inequities based on ethnicity are in the spotlight, therefore we need AI that makes it easier for marginalized populations to benefit from improved technology, rather than the technology pushing them further into the margins. When that happens we will all experience a better world.