“We need to be super careful with AI. Potentially more dangerous than nukes.” Elon Musk in 2014
Elon Musk first warned about the dangers of AI nearly a decade ago, and his feelings about the technology don’t seem to have changed much. Fast forward to 2023, and Musk is still concerned about the technology falling into the wrong hands, sounding the alarm that artificial intelligence has the “potential of civilization destruction.” But it’s a love/hate relationship, as Musk, one of the early founders of PayPal, is also one of AI’s biggest ringleaders.
Meanwhile, innovation around generative AI remains robust ever since the rise of chat robot ChatGPT, which originally used Twitter data as a key data source. Payment companies have generative AI in their sights, and it’s only a matter of time before it makes its way into fintech. Already market segments like BNPL and card issuers are beginning to dip their toes into the generative AI waters in what is likely to create a ripple effect.
Let's take a look at the latest developments in the fintech industry, including Big Tech banking trouble, expansions, people moves, fundraising, and (you guessed it) AI.
Signs of the banking crisis are beginning to show up in Big Tech. Apple’s savings product, a joint venture between the iPhone maker and Goldman Sachs that’s open to Apple Card holders, has hit a snag. Depositors, who were drawn in by a yield of 4.15%, have been struggling to make withdrawals, according to reports.
The Wall Street Journal documented the experience of customers whose money transfers from the Apple savings account to other banks experienced delays of several days. In some cases, thousands of dollars appear to disappear into thin air with no trace of any transaction beginning. Worse, there appears to be confusion among the reps at Goldman Sachs, the bank in charge of holding the deposits.
Image by Twitter
• American Express is experimenting with generative AI. The card giant, which has been around since 1850, is exploring the use of generative AI in the customer experience with a focus on credit cards and bank products for both individual and enterprise customers. While Amex may not introduce a “standalone” AI product, the technology should become apparent in the company’s financial services.
Separately, Amex is going to be facing some new competition in the card arena. Payments company Stripe is looking to get into the card-issuing business so that merchants can more easily gain access to credit. Stripe introduced Stripe Issuing, a commercial card program comprising controls and APIs designed for fintech-focused businesses.
• Back to AI. Klarna, a European ‘Buy Now, Pay Later’ company with international operations, is implementing generative AI further into its business model. In its Q1 results, the company outlined an aggressive path for the technology, including a collaboration with OpenAI, the developer behind ChatGPT. Klarna is using AI with the goal of saving consumers “time, money, and worry.”
The company is looking to capitalize on a trend where more than three-quarters of purchases begin with a search. The company uses a recommendations-based approach by harnessing its access to billions of data points where AI is used to make those results more relevant to consumers — also helping retailers.
• FinTech Festival: Singapore’s annual FinTech Festival will take a different spin this November. The event will be centered around the theme of artificial intelligence with the aim of placing a spotlight on the importance of this emerging technology. In particular, the event will focus on how AI can be applied to financial services. The FinTech Festival started in 2016 and is organized by the MAS and Elevandi, Constellar and The Association of Banks in Singapore.
SPACs demand may not be at its peak, but there are still deals being done. Most recently, Asia-focused personal finance marketplace MoneyHero, is reading a U.S. listing via a combination with Bridgetown Holdings, a blank-check company backed by the likes of billionaires Peter Thiel and Richard Li. The deal is valued at $200 million, and the new company will have an enterprise value of up to $342 million.
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IPOs and SPACs by vertical. Chart by Pymnts.com
Magic, a San Francisco-based cryptocurrency wallet-as-a-service play, has raised $52 million in a round led by PayPal Ventures. Magic plans to direct the proceeds toward an expansion in the EU and APAC regions.
PayPal Ventures Partner Alan Du stated, “Mass adoption of web3 is a hot topic, and Magic is facilitating this with a safe and simple solution.”
Magic’s wallet technology lets businesses reach customers on their own apps while streamlining the onboarding process for customers that are novices in Web3.
The fintech industry is hiring. More specifically, Wilmington, N.C.-based payments startup Approve, formerly known as Kwipped, is adding as many as 50 tech jobs on the heels of receiving $3 million in funding. The company will be doubling its workforce in the Wilmington area across account executives, finance, digital marketing and developers.
• Separately, Christian Faes, founder of U.K. mortgage lender LendInvest, has moved across the pond from London to the the U.S. where he has started a new investment startup in Los Angeles. Faes & Co is dedicated to “building and investing in technology-enabled direct lending businesses.” In addition, Faes has launched a new credit fund, the Faes & Co Income Fund, that the startup will manage.
Faes is reportedly seeking a friendlier business and political environment in which to run a fintech company.
SoFi - Shares of finance company SoFi are in the spotlight this week. In the past week, SoFi Stock has ballooned by roughly 28% with the hourglass on the student loan moratorium set to expire. SoFi is active in the private student loan market and its performance stands to benefit from resumed payments later in 2023.
SoFi Chart by TradingView
Now that U.S. lawmakers have finally agreed on a debt deal, the markets can breathe a sigh of relief. But in this economic climate, with rising interest rates and high inflation, the roller coaster ride isn’t over.
Fed officials will be meeting once again in mid-June to discuss the fate of interest rates. Rumor has it that policymakers will forego a rate hike at this gathering in favor of resuming them later this year. But with the latest strong jobs data, that could all change. Until then, be sure and buckle up as it’s likely to be a wild ride — maybe even for AI.