FinTech Weekly - AI Frontiers - Issue #456

In a recent episode of the Blockchain Journal podcast, editor-in-chief David Berlind sat down with IBM Consulting's global partner, Shyam Nagarajan, to discuss the burgeoning fields of AI and blockchain. Nagarajan emphasized the crucial role of trusted data for AI models and how blockchain can ensure responsible, fair, and transparent AI deployment in enterprises. The discussion delved into blockchain's potential to verify data authenticity and provenance within AI model supply chains. While acknowledging the current theoretical nature of these applications, IBM is set to bridge this gap with new governance solutions aimed at simplifying blockchain's integration into business practices, underscoring blockchain's importance in mitigating AI's inherent challenges and risks.

Vitalik Buterin, Ethereum co-founder, has recently spotlighted a groundbreaking AI application aimed at enhancing Ethereum's security through formal code verification and bug detection. This initiative addresses the platform's vulnerability to coding errors, underlining the increasingly pivotal role of AI in cybersecurity, particularly within the DeFi and smart contract sectors, which have billions in TVL. Buterin's endorsement underscores the evolving convergence of AI and blockchain technologies. High-profile collaborations, like those between Microsoft and OpenAI, are exploring AI's capacity to identify and mitigate cyber threats, reflecting a broader movement towards responsible AI use in bolstering cybersecurity frameworks. Furthermore, Buterin has proposed several innovative ideas for AI and cryptocurrency integration, envisioning a future where these technologies seamlessly complement each other, driving forward both security and functionality in the digital finance landscape.

Carbon, established in 2016 and known for providing instant loans, BNPL services, savings plans, and a debit card to Nigerians, is expanding into the SME sector by acquiring Vella Finance. Vella Finance, recognized for its services in local and cross-border collections, payouts, and revenue management for African firms, will soon integrate its business customers into Carbon Business, also offering its individual clients an upgrade option. Carbon Business will offer AI-powered transaction analysis, low-interest loans, and additional advanced features to its users. Chijioke Dozie, Carbon's co-founder, praised Vella Finance's innovation and market understanding, highlighting the acquisition as a strategic move driven by shared values of innovation and pioneering in financial services, aiming to enhance their SME platform, considered unparalleled in the market.

Simone Mensink of IG&H and Hein Wegdam of ING Real Estate discuss the future of credit assessment, focusing on combining artificial intelligence (AI) with expert knowledge for efficiency and accuracy. Traditional manual credit checks, often complicated and labor-intensive, are evolving with 'rule-based' decision trees for faster processing. However, these systems face challenges with complexity and maintenance, and AI models struggle with limited data and adaptability to new changes. Their insights highlight the need for a hybrid approach that leverages both AI and human expertise for more effective credit risk evaluation.

Deutsche Telekom has joined forces with AI startup Fetch.ai to push forward AI and blockchain technologies, becoming the first major corporate partner of the Fetch.ai Foundation alongside Bosch. Through its subsidiary, Deutsche Telekom MMS, it will act as a validator for Fetch.ai's decentralized network, enhancing security for blockchain transactions. Fetch.ai's platform utilizes autonomous AI agents to automate and optimize tasks across various sectors like automotive, supply chain, and healthcare. Dirk Röder from Deutsche Telekom emphasized the transformative impact of combining blockchain, AI, and IoT, with autonomous agents set to simplify and secure industrial processes. Deutsche Telekom's role in ensuring network security is pivotal as Fetch.ai expands its permissionless, decentralized network globally.

The Generative AI market in the fintech sector, valued at USD 1,084.9 million in 2023, is projected to soar to USD 19,963.7 million by 2032, exhibiting a remarkable CAGR of 38.2%. This surge reflects the increasing deployment of AI tools in finance to enhance services, streamline operations, and combat fraud, ensuring an efficient fintech ecosystem. Beyond fintech, generative AI's influence spans healthcare, pharmaceuticals, and R&D, leveraging historical data to innovate and optimize with minimal resources. Its adoption in finance promises to revolutionize the industry by leveraging the vast daily data generation for better customer insights and personalized services, signifying a pivotal shift towards automation and innovation in the financial sector.

Haris Karonis, founder and CEO of Viva Wallet, a fintech co-owned by JPMorgan, has initiated legal action against the banking giant, alleging that JPMorgan is deliberately stifling his company's expansion to reduce its valuation. Karonis claims JPMorgan is blocking Viva Wallet's entry into the U.S. and new European markets and allowing its payments business to compete unfairly in Europe. This legal battle, filed in the High Court in London, stems from JPMorgan's potential to fully acquire Viva Wallet if its value drops below €5bn by June 2025; JPMorgan currently holds a 48.5% stake. This dispute underscores the growing tension between JPMorgan and the founders of fintechs in which it has invested, highlighted by a similar case against the founder of Frank, a student finance platform, over alleged user base inflation. JPMorgan, having invested €800mn in Viva in 2022 as part of its European payments market strategy, faces accusations from Karonis's company of creating "perverse incentives" to devalue Viva for a cheaper acquisition, amidst broader concerns over fintech valuations in a high-interest rate environment.