AI is eating banking: JPMorgan unveils IndexGPT ๐ค๐ธ; Revolut launches standalone crypto exchange Revolut X ๐ฎ๐; Credit Unions outpacing community banks in AI chatbot adoption ๐ค๐
You're missing out big time... Weekly Recap ๐
๐ Hey,ย Linas here!ย Welcome back to a ๐ weekly free editionย ๐ of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, itโs the only newsletter you need for all things when Finance meets Tech.
If youโre not a subscriber, hereโs what you missed this week:
Top resources for building and scaling billion-dollar startups ๐ฆ [600+ pages of knowledge and advice to launch & scale your next unicorn in 2024]
Buy the dip? Shopify tops estimates but the stock is down ๐คทโโ๏ธ๐ [unpacking the latest numbers and what they mean & why Iโm still bullish on Shopify + some bonus dives inside]
Robinhood Q1 2024: surging growth, profitability, and bright future ahead ๐ [unpacking the most important facts and figures & why Robinhood makes a compelling investment case + more bonus dives into Robinhood and its biggest competitor in crypto]
Historic: Nubank surpasses 100M customers, leading digital banking revolution in LatAm ๐คฏ๐ [quick recap, why it matters & whatโs next + some solid bonus resources]
Dave demonstrates robust growth and profitability in Q1 2024, solidifying its position as a leading neobank ๐ป๐ [unpacking their latest numbers & why Dave might be worth your time and money in 2024 + some bonus reads inside]
Affirm's Ascent: navigating the BNPL landscape with finesse ๐๐ฎโ๐จ [a deeper dive into their latest numbers & why the BNPL giant is poised for solid growth]
Payoneer delivers strong Q1 and promising prospects ๐ [breaking down the latest numbers & why this FinTech is worth watching]
Shift4: poised for stellar growth despite recent selloff ๐ [breaking down their latest numbers & why itโs one of the most undervalued FinTechs on the market now]
America's top digital bank is getting ready for public listing, or Chime's path to IPO ๐ณ๐
As for today, here are the 3 brilliant FinTech stories that were changing the world of financial technology as we know it. This is one of the most interesting and intense weeks this year thus far, so make sure to check all the above stories.
AI is eating banking: JPMorgan unveils IndexGPT ๐ค๐ธ
The news ๐๏ธ Harnessing the power of artificial intelligence, banking giant JPMorgan Chase JPM 0.00%โ has just unveiled IndexGPT, a tool designed to revolutionize thematic investing.
IndexGPT leverages OpenAI's advanced GPT-4 language model to generate investment baskets based on emerging trends and themes.
Letโs take a closer look at what itโs all about and why it matters.
More on this ๐ Letโs first understand how this tool works.
IndexGPT starts by generating a list of keywords associated with a particular investment theme, such as cloud computing, e-sports, or cybersecurity. These keywords are then fed into a separate natural language processing (NLP) model that scans news articles to identify companies involved in that space. This automated process therefore allows IndexGPT to create thematic indexes that go beyond traditional industry sectors and company fundamentals.
So whereโs AI in all of this? This is where OpenAIโs LLMs come into play. The GPT-4 model enables IndexGPT to generate over twice as many keywords compared to previous software used by JPMorgan, resulting in "a superior representation of the theme," according to Rui Fernandes, head of markets trading structuring at JPMorgan. This expanded keyword generation thus helps IndexGPT identify a broader range of stocks, including lesser-known companies that may be overlooked by traditional thematic indexes.
The USP ๐ฅ IndexGPT primarily targets institutional clients who can gain exposure to these thematic baskets through structured products like swaps or notes. Yet, the tool also has potential applications for trend-following strategies and retail investors seeking to capitalize on emerging themes before they become mainstream. Brilliant future use case - add this as part of Chase Digital Bank's offering to further ignite growth:
One of the key benefits of IndexGPT is its ability to quickly identify stocks that represent a theme at its inception. This is crucial for investors with shorter holding horizons who want to ride the momentum of emerging trends. By automating the index creation process, IndexGPT can hence help investors stay ahead of the curve and potentially generate superior returns.
โ๏ธ THE TAKEAWAY
Whatโs next? ๐ค First and foremost, the launch of IndexGPT yet again underscores JPMorgan's commitment to harnessing the power of artificial intelligence across its operations. With a team of over 1,500 data scientists and machine learning engineers, the bank is brilliantly (if not the best) positioned to integrate AI into various aspects of its business, from investment advice to risk management. Zooming out, we also must note that IndexGPT represents another strong step forward in expanding the application of generative AI in finance. As the first major bank to offer an AI-powered investment tool directly to clients, JPMorgan is clearly setting the stage for a new era of AI-driven financial services. The best part is that this move could potentially disrupt the role of traditional financial advisors and democratize access to sophisticated investment strategies. Looking ahead, as more banks and investment firms embrace AI, we can expect to see increased efficiency, personalized advice, and potentially higher returns for investors. Watch this out!
ICYMI: AI is eating Finance: JPMorgan is getting into LLMs ๐ณ [what itโs all about & why it makes sense + more reads on how AI is eating finance]
JPMorgan doubles down on growing the old-fashioned way: branches ๐ฆ [why it makes sense + a deep dive into JPM and how it recently made history]
Revolut launches standalone crypto exchange Revolut X ๐ฎ๐
The news ๐๏ธ UK FinTech giant Revolut has just launched a dedicated cryptocurrency trading platform called Revolut X. This new offering, available to UK retail customers, aims to provide a seamless and competitive trading experience with low fees and easy on/off-ramping between fiat and crypto.
Letโs take a look at this.
More on this ๐ Revolut X allows users to trade over 100 cryptocurrencies, including Bitcoin, Ethereum, and XRP, with fixed fees of 0% for makers and 0.09% for takers, regardless of trading volume. The platform is accessible to all UK Revolut retail account holders, who can log in using their existing credentials and trade directly between Revolut X and their Revolut accounts without additional fees or limitations.
The launch of Revolut X comes on the heels of the company's introduction of Revolut Ramp in March 2024, which enables users to purchase crypto directly within their Web3 wallets through a partnership with Consensys, the developer of MetaMask.
Zoom out ๐ This move signifies a renewed focus on crypto for Revolut, following a period of scaling back its crypto offerings in the UK and US due to regulatory hurdles.
We can remember that back in December 2023, the company planned to halt crypto services for UK business clients ahead of new Financial Conduct Authority (FCA) regulations. Similarly, in August 2023, Revolut suspended its crypto-related services in the US, citing the evolving regulatory environment and uncertainties in the crypto market.
Despite these challenges, Revolut remains committed to complying with legal and regulatory requirements in all jurisdictions where it offers services. The company advocates for crypto market regulation to ensure consumer protection and a level playing field.
โ๏ธ THE TAKEAWAY
Whatโs next? ๐ค The launch of Revolut X is an interesting yet expected move that can have long-term implications for both Revolut and the broader fintech and finance space. By offering a dedicated crypto trading platform, Revolut is positioning itself to capture a share of the growing demand for cryptocurrency investment opportunities. This move could help the company diversify its revenue streams and attract new customers interested in crypto trading. This would mean higher engagement, bigger ARPUs, and a solid bump in revenue. Moreover, Revolut's entry into the crypto exchange market could put pressure on traditional financial institutions to consider offering similar services to remain competitive. As more fintech companies embrace cryptocurrency, it may accelerate the mainstream adoption of digital assets and further blur the lines between traditional finance and the crypto world. Looking ahead, Revolut's success with its crypto trading platform will likely depend on its ability to navigate the evolving regulatory landscape and maintain a secure and user-friendly trading environment. Importantly, as the company expands its crypto offerings, it will be crucial to prioritize compliance, consumer protection, and educational resources to help users make informed investment decisions. Otherwise, it could be a dealbreaker for Revolut to ever get a UK (and then - US) banking license.
ICYMI: โYou either die a FinTech or live long enough to see yourself selling adsโ - Revolut ๐ข๐ธ [a closer look at why selling ads makes so much sense + lots of bonus reads and deeper dives into Revolut, JPMorgan & Apple]
Credit Unions outpacing community banks in AI chatbot adoption ๐ค๐
The news ๐๏ธ A recent study by Cornerstone Advisors has revealed that credit unions in the United States are moving more aggressively than community banks in their plans to adopt AI-powered chatbots in 2024.
Letโs take a quick look at this.
More on this ๐ The "What's Going On in Banking" annual report surveyed 359 US financial institutions, with 54% being banks and 46% credit unions.
The findings show that nearly 30% of credit unions intend to invest in AI chatbots this year, while 42% of community banks are still in the discussion phase, and 24% have not even considered the technology. The report does not specify whether these planned chatbots will be consumer-facing or used internally to enhance employee productivity and job satisfaction.
The slower adoption by community banks may be attributed to limited tech budgets and concerns over AI "hallucinations," such as in the Moffat vs. Air Canada case, where a company was held liable for a chatbot's negligent misrepresentations to a consumer. This has led more risk-averse firms to delay public-facing implementation.
However, financial institutions may still experiment with internal AI chatbots. Morgan Stanley, for example, launched an AI assistant last year to help advisors and support staff navigate research reports, while Bank of America's Erica serves retail banking customers, and its Banker Assist helps employees provide unique client insights.
The report's author, Ron Shevlin, predicts that the use of AI in financial institutions will be both under- and overstated due to confusion over the varied AI taxonomy. Nonetheless, smaller financial institutions, still grappling with remaining competitive amid high interest rates, will likely continue to seek a technological advantage through AI-powered solutions or fintech partnerships that enhance customer experience.
โ๏ธ THE TAKEAWAY
Looking ahead ๐ As AI keeps advancing, one thing is clear - the adoption of chatbots in the banking sector will grow. And this trend has some solid implications for the future of customer service and internal operations in financial institutions. Credit unions' early adoption of AI chatbots may give them a competitive edge over community banks, as they can offer more efficient and personalized services to their members. Of course, the responsible implementation of AI chatbots will be crucial to avoid potential legal and reputational risks. Financial institutions therefore must ensure that their AI systems are transparent, unbiased, and compliant with regulations. Looking ahead, the collaboration between financial institutions, technology providers, and regulators will be paramount to establishing best practices and guidelines for the safe and effective use of AI in banking. So watch this closely!
๐ What else Iโm watching
Mastercard Enters China's Domestic Payments ๐ณ๐จ๐ณ Mastercard MA 0.00%โ, through its joint venture Mastercard NetsUnion, has started processing domestic payments in China. This week marked the beginning of processing payments made with Mastercard cards issued by Chinese banks. Mastercard-branded cards are now accepted for both domestic and international purchases. The entry into China's multi-trillion dollar payments market follows years of regulatory hurdles. Mastercard NetsUnion, formed in 2015 with NetsUnion Clearing Corporation, has met local requirements and obtained the necessary certificates. The joint venture received formal approval from the PBOC and the National Administration of Financial Regulation last year to commence domestic bankcard clearing activity. ICYMI: Mastercard's global reach and digital dominance drive sustained growth in Q1 2024 ๐ [a deeper dive into the most important numbers, what they mean, and whatโs next for Mastercard + a bonus deep dive into its biggest rival]
Chime Fined ๐ณ Digital banking giant Chime has agreed to pay more than $4.5M to settle with the Consumer Financial Protection Bureau (CFPB) for illegally delaying consumer refunds. Thousands of Chime users experienced significant delays in receiving balance refunds after closing their accounts, causing financial harm and forcing some to turn to expensive credit options. Chime attributed most delays to a configuration error with a third-party vendor during 2020 and 2021. As part of the settlement, Chime will pay at least $1.3 million in redress to consumers and a $3.25 million penalty into the CFPB's victims relief fund. ICYMI: America's top digital bank is getting ready for public listing, or Chime's path to IPO ๐ณ๐ [quick look at Chimeโs journey so far + some solid recent numbers]
Visa Introduces Generative AI Tool to Combat Brute Force Attacks ๐ค Visa V 0.00%โ is launching a new generative AI tool, the VAAI Score, to assign real-time risk scores to transactions and prevent enumeration attacks, also known as brute force attacks. These attacks use automated scripts and botnets to test for vulnerabilities in card-not-present transactions, resulting in $1.1 billion in annual fraud losses. The VAAI Score, an update to Visa's Account Attack Intelligence (VAAI) offering, will be available to U.S. issuers first and expand to Europe in April 2025 for both issuers and acquirers. ICYMI: Visa's strong Q2 2024 results demonstrate resilience and growth potential ๐ [analyzing the most important numbers, seeing what they mean, & whatโs next for Visa + some bonus deep dives to learn more]
๐ธ Following the Money
India-based cross-border payments platform BRISKPE has raised $5M in a seed funding round led by online payment solutions provider PayU.
The web3 publishing platform Paragraph raised $5M in fresh financing in addition to acquiring Mirror, an Ethereum-based blogging platform.
Challenger bank Monzo raised $190M from Hedosophia, Capital G, and Singapore's GIC, weeks after securing $400M, boosting its valuation to $5 billion. With over nine million personal account customers, Monzo is the UK's 7th biggest retail bank. ICYMI: Monzo's fresh $5 billion valuation and ambitious yet questionable US expansion plans ๐ฐ๐บ๐ธ [a recap of the current status, future plans + a deep dive into why Monzo is unlikely to succeed in the US]
๐ Thatโs it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter,ย invite your friends and colleagues to sign up: