The case for decentralisation

On By mehranmuslimiblogIn Bitcoin, Blockchain, FintechLeave a comment

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Centralisation came in the second phase of Internet development. In the first phase of the web, Internet services were built on open protocols, but by the time of the new millennium this was rapidly changing to centralised platforms. Firms like Google and Amazon, Facebook and Apple (GAFA) designed software that outpaced the open protocols, and once smartphones arrived, the trend picked up speed.

The centralisation effect

What then happened is that startups found it much harder to grow their businesses online, because of the dominance of centralised platforms that could change the rules at any moment and take away the newcomers’ audience. Innovation has been stifled and the Internet environment is less dynamic because of it. Furthermore, centralisation has aided the rise of fake news and the numerous debates over privacy and biased algorithms.

One response to centralisation might be to impose government regulation on the largest Internet companies, but the problem here is that the web is software based, which means the networks can be redesigned to exploit market forces. So, this type of solution is not of much benefit.

Decentralisation is the answer

Cryptonetworks are a decentralised solution. They are governed by communities and have the potential to outperform centralised platforms.  The reason they are an answer is that they behave in a different way to those platforms that are centralised. For example, when a  centralised platform starts up they do everything they can to recruit users and third-parties like developers, businesses, and media organisations to give the service added value. Facebook is a good example of this. As platforms like this move up the adoption S-curve, their power over users and third parties steadily grows. Again, look at Facebook.

Cryptonetworks operate in a very different way. These decentralised networks “ use consensus mechanisms such as blockchains to maintain and update state, 2) use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants,” as Chris Dixon suggests.

Other advantages are that they also stay neutral as they grow, and use open source protocols, whereas centralised platforms use a ‘bait and switch’ approach. Users have a voice via the community that governs the decentralised network and users work together towards a common goal – community growth and strengthening the token’s value.

Ultimately, the question of whether decentralized or centralized systems will win the third era of the Internet depends on who is going to build the most compelling products. The entrepreneurs working on decentralised platforms are up against the strong cash flow of Google etc, but on the other hand they also have a growing fan base that will provide robust support.  Decentralisation also provides a more level playing field for third-party developers and businesses, and that could well be one of its biggest advantages.

 

 

 

Challenger banks are on the rise

On By mehranmuslimiblogIn Banks, Business, Economy, GovernmentsLeave a comment

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Challenger banks, neobanks, whatever you want to call them, have been making significant in-roads in the banking sector and are attracting large chunks of venture capital investment says KPMG. There are some subtle differences between the two: challenger banks are often established firms that compete with larger financial institutions, while neobanks tend to be completely digital and favour operating via mobile devices, but the difference between them is somewhat blurred. What they do share in common is this: “these banks don’t carry the weight of legacy technology, so they can leapfrog over traditional infrastructure and disrupt the status quo.”

Two of the most prominent – Monzo and Atom Bank—raised $93 million and $140 million respectively last year. Starling Bank, which is ‘digital-only’ is raising a further $54 million in a new funding round. These are all British startups by the way.

Why are so many challenger banks British?

The chief reason for the fact that so many challenger banks are UK-based is this: Britain isn’t as saturated with big banks and their branches as the US, so there is more opportunity for non-traditional financial institutions. Furthermore, the UK was an early adopter of digital banking, dating back to the dotcom era of the late 1990s and early 2000s. Basically, the UK has had a head start in this financial area, although it would be a mistake to think that challenger banks are a UK-only phenomenon.

Challenger banks worldwide

There are currently about 100 challenger banks worldwide: Brazil has Banco Original and Nubank, while Germany is home to SolarisBank and N26 and in Asia there is MyBank, WeBank, Timo, Jibun, K Bank and Kakao.

What advantage do challenger banks have?

They don’t have a legacy system and because most of them don’t offer a full suite of banking services they don’t have to operate within such tough regulatory environments. This means they have more freedom and flexibility, which in turn allows them to develop their customer base faster, especially in developing countries where bank branches are more rare than in the west.

What services do challenger banks offer?

Their focus is usually on niche products rather than trying to provide all the services that the big banks provide. For example, customers can open a current account with a relatively high rate of return and get loans, but they may have to go elsewhere for services such as credit cards, mortgages and wealth management. Some of the challenger banks do have banking licences, although not all follow this model.

Although challenger banks are on the rise, the old guard hasn’t disappeared just yet, and the traditional banks are aware of the threat the challengers pose and are preparing for battle. The traditional banks have the advantage of a large and well-establish customer base and strong branding that promotes trust. The challenger banks will have to earn trust. That will most likely come from the millennial generation over the next decade, because they are the group that have lost trust in the banks their parents use, and this is the audience that challenger banks will need to court if they are to become an established sector in banking.

 

 

 

 

UK businesses struggle to keep up with AI

On By mehranmuslimiblogIn AI, FintechLeave a comment

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A new report by Microsoft, published last week, indicates that artificial intelligence (AI) is changing business models so quickly that UK companies are struggling to keep up.

The tech giant surveyed 5,000 plus British business leaders and employees discovered that 41% of British companies surveyed said their business models might cease to exist in the next five years thanks to AI. Or perhaps ‘thanks’ is the wrong word; what they really mean is ‘due to’.

The report also revealed that 51% of the country’s business leaders do not have an AI strategy in place for their organizations, which is a significant proportion. This news comes at a time when British businesses are concerned about the outcome of the Brexit negotiations and could face tough, new challenges in a range of industry sectors.

As Clare Barclay, Microsoft U.K.’s chief operating officer, told CNBC, “Like any change, sometimes it’s easier to do nothing than to do something.”

On the other side of the factory floor, so to speak, employees have their own worries about the use of AI. Microsoft found that 45% of employees are concerned their job could be taken by AI, yet 51% are not being taught the skills to help prepare for changes in the workforce. Of course, this makes sense: if management is unengaged with AI, how can one expect employees to embrace it.

Barclay highlighted the problem as her company sees it, pointing out that AI is more of an opportunity than threat, and suggested UK businesses needed to “focus on this AI to make businesses stronger and, in our opinion, not leaner.”

Indeed the survey results show the benefit of AI. Companies already using AI technology outperformed other businesses in areas like productivity, performance and business outcomes. Moreover, companies that develop strategies around the ethics of AI are even more productive.

Microsoft is making big investments in AI and it also believes that companies like it can take the lead in helping others adopt the technology and develop “safe and ethical AI platforms, for example by ensuring that human bias isn’t built into algorithms.”

What is very clear is that UK businesses need to speed up their pace of adoption of AI and ensure they are equipped to face the future with a stronger technology foundation.

 

Google offers $25 million for AI challenge

On By mehranmuslimiblogIn AI, Big Data, FintechLeave a comment

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It’s today’s big story: Google is offering $25 million in grants to nonprofits, universities and other organisations working on AI projects that will benefit society,

as part of its AI for Social Good initiative. Google will open the application process this coming Monday and will announce winners next spring at Google’s annual I/O developer conference.

Details of the challenge explain that Google.org is issuing an open call to organizations around the world to submit their ideas for how they could use AI to help address societal challenges. Selected organizations will receive customized support to help bring their ideas to life: coaching from Google’s AI experts, Google.org grant funding from a $25M pool, credit and consulting from Google Cloud, and more.

Google says the programme is meant to help solve the world’s most pressing problems, such as crisis relief, environmental conservation and sex trafficking.

However, it is also clear that this ‘competition’ comes at a time when Google’s own use of artificial intelligence is under increasing scrutiny, including “in controversial military work or reported efforts to build a censored search engine in China,” as CNET says. There has also been Project Maven, a U.S. Defense Department initiative aimed at developing better AI for the military that resulted in a rebellion by Google’s own employees and some 4,000 of them petitioned the executives to stop the project, which the company duly did and promised not to engage in similar projects again.

At the press announcement, Google’s head of AI, Jeff Dean, avoided discussing these issues, although he did mention Google’s ethical principles that outline how it will and will not use the technology.

Yossi Matias, vice president of engineering, said in an interview last week, “The gist of the program is to encourage people to leverage our technology. Google can’t work on everything. There are many problems out there we may not even be aware of.”

It is going to be interesting to see what initiatives come out of this global challenge. Hopefully we will see a diverse range of ideas for AI use that can improve the world when it is so badly in need of repairs in all areas of existence.