Snippings

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While technology offers clear opportunities to reduce physical costs (personnel, equipment, energy, time, etc.), it’s less clear what impact it will have on the risk-based financial costs (liquidity buffers/spreads, credit spreads, and term premia) that constitute most of a bank’s revenues. As noted above, Philippon’s work shows intermediation costs have been stable for over a century.

From: Risk Tolerance, the Price of Certainty, and the Value of a Bank Charter.

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Critics who complain banks are a “cartel” are therefore making a category error. The banking oligopoly isn’t some sort of market failure: banks are quasi-sovereign entities and restricting access to taxpayer support ensures the rest of the economy operates more squarely on a free-market footing (the oligopoly isn’t a bug, it’s a feature). Companies that want to compete in the payments business (and therefore take responsibility for customers’ liquidity) should do the work necessary to obtain a bank charter. In return, regulators should offer a realistic path for applications to be approved (including considering specialized charters better suited to a more limited business model). Once depositors’ liquidity risk is equalized, competition can shift to areas (e.g., cost efficiency and service quality) where superior technology can be decisive.

From: Risk Tolerance, the Price of Certainty, and the Value of a Bank Charter.

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Amazon already offers “everyday low prices”. The consumer may not get the absolute lowest price, but they will get a low price. Today that makes Amazon a default destination for many shopping trips.

From: Meta Muse is not a game changer – by Andrew M. Dresner.

Amazon does not want to serve as Muse’s fulfillment warehouse only when it has the absolute lowest price.

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For an example of the alternative viewpoint, OpenAI CEO Sam Altman recently argued that “the world should accept some bad things happening for the benefit of this technology.” That might make sense for a person getting incredibly rich and powerful off the technology while worrying about competition from other companies, including foreign ones. But the rest of us don’t have to agree that these people and their work are so special that, for the first time ever, law and public interest don’t apply.

From: The Plausible Techno-Dystopian Future.

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But while existential risk deserves some attention, fixating on apocalyptic scenarios ignores real-world problems involving the actually already existing AI. We have proven methods to address disruptive technology, but for anyone who opposes the use of those methods, apocalyptic fantasies can be a useful distraction.

From: Fear of Hypothetical AI Scenarios Distract from the Real World Problems and Proven Solutions.

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I wish I was making this up, but I’m not. A new startup called “Warhound” has raised $200 million to create genetically enhanced dogs for the United States military, law enforcement and emergency first responders. Their mission is to “rebuild America’s domestic supply of elite working dogs” and reduce dependency on European dog breeders for military canines. I assume that they will work alongside Elon Musk’s robot army to keep us under control during the transition to techno-feudalism and the Nerd Reich. Happy Friday everyone!

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The application of AI agents operating on new payment rails and the rapid adoption of tokenized assets will work together to drive changes to the banking industry at an unprecedented pace, scale and breadth.

From: A ‘double-flywheel’ effect is about to transform financial services | American Banker.

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By 2030, I expect the agent layer to be largely owned by platforms, and the settlement layer to be split three ways by geography. The question is who owns the narrow strip between them, where decision turns into payment and somebody must answer for it.

From: Meta Already Tried to Issue Money. Then It Learned Something..

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At the regional level, the association between local financial infrastructure and financial harm differs by age: greater bank service-point density is associated with lower financial harm among younger adults, whereas greater building-society density is associated with lower financial harm among older adults. The findings show that the geography of finance shapes not only access to financial services, but also the uneven distribution of financial harm.

From: Full article: The geography of fintech-related financial harm: a multilevel analysis in the UK.

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AI has been changing insurance sector for some time, not only as a tool to speed up processes but to reshaping the way that key processes are designed and managed. The technology is helping insurers to assess risks more accurately and to speed up claims, to spot fraud and predict what customers might want, to improve pricing and many other applications. AI is becoming a core part of insurance services and explainable AI (XAI) makes the push to exploit it even stronger by ensuring that decisions made by machines are clearer and fairer. This helps build trust with customers and also protects sensitive personal data.