Snippings

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On Monday, a developer using the popular AI-powered code editor Cursor noticed something strange: Switching between machines instantly logged them out, breaking a common workflow for programmers who use multiple devices. When the user contacted Cursor support, an agent named “Sam” told them it was expected behavior under a new policy. But no such policy existed, and Sam was a bot. The AI model made the policy up, sparking a wave of complaints and cancellation threats documented on Hacker News and Reddit.

From: Company apologizes after AI support agent invents policy that causes user uproar – Ars Technica.

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EU capitals reached an agreement on the Commission’s draft law in December, paving the way for discussions with EU lawmakers to make the proposals a reality. They said the “better data sharing” rules would enable financial players to target consumers with “highly personalised financial products and services.”
But financial lobbyists heavily criticized the proposed rules. In December, six industry associations, representing banks, insurers and asset managers, argued the Commission hadn’t adequately calculated the cost of the proposed rules and that customer and market demand for such data-driven services had not been proven. The group said various key concerns “repeatedly raised” remained “largely unaddressed.”

From: Brussels U-turns on plans for more consumer financial data access – POLITICO.

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It’s hard to say precisely how a broad-based digital verification system would work

From: Tokenization of the market coming if we fix one problem: BlackRock CEO.

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Tobi Lütke, CEO of the Canadian e-commerce player Shopify, instructed staff to prove that a job can’t be done using AI before requesting new staff or resources. Since 2022 the company has cut its workforce by a third, which makes it an intereting case study for fintechs developing their AI strategies.

Swedish fintech Klarna is also an interesting case study on the deployment of AI. They were also early advocates for the new technology and according to Sebastian Siemiatkowski, Klarna’s CEO, their sales and marketing expenses in the first haf of last year fell 16% compared with the same period in 2023, while customer service and operations expenses shrank 14%. Notably, it achieved those cost savings — much of which it credited to the use of AI — while generating 23% higher revenues.

(The value of the AI cost savings is highlighted by substantial increases in other non-operating expenses. For instance, in the same period Klarna reported a 44% increase in losses from people not paying their loans back while funding costs rose 67%.)

Klarna trimmed its workforce down from 5000 to 3800 heading towards its (now stalled) IPO. It claims that nine out of 10 employees already use AI in their daily work, but is aiming to hire over 100 engineers by 2025 in Poland. Siemiatkowski says that the new Warsaw hub will play a pivotal role in the company’s broader strategy to lead AI adoption. Overall then Klarna was able to use AI to help to manage processing and servicing costs, which rose more slowly than revenue.

Does AI automatically mean returns for fintech? That is a more difficult question to answer. Shopify’s stock price is now around half what is was before the layoffs started. One explanation might be that while overall employee numbers are down, the average salary may rise as the hiring of expensive AI engineers continues. Klarna’s technology and product development expenses climbed 17% over the period discussed above, although the figures do show that Klarna’s cost savings more than offset the higher technology costs. Overall operating expenses fell 2% and the company posted a small profit on a net income basis in the third quarter last year.

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Called Monzo Stand-in, the replica platform enables customers to make payments, withdraw cash, freeze their card and send and receive bank transfers even if the main Monzo app goes down.

Outages in the banking industry have become a pressing concern for regulators and politicians as more customers move online.

Recent figures from the UK Government Treasury Committee revealed that nine of the top banks and building societies operating in the UK accumulated at least 803 hours – the equivalent of more than 33 days – of tech outages in the last two years.

During a recent three-day outage at Barclays, 56% of online payments failed due to ‘severe degradation’ of its mainframe processing performance. The bank confirms it expects to pay between £5 million and £7.5 million in compensation to customers for ‘inconvenience or distress’.

In February British banks TSB, Bank of Scotland, Nationwide Building Society, Halifax, Lloyds and First Direct all reported problems for ingoing and outgoing payments.

Monzo Stand-in is an independent set of systems that run on Google Cloud Platform and is able to take over from the bank’s Primary Platform, which runs in Amazon Web Services (AWS), in the event of a major incident. It supports the most important features of Monzo like spending on cards, withdrawing cash, sending and receiving bank transfers, checking account balances and transactions, and freezing or unfreezing cards.

From: Monzo develops backup bank to cover outages.

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The life of most people in 1800 was no better, and in some demonstrable measures worse, than that of a hunter-gatherer in 100,000 bc. Malthus has had a terrible press for predicting that material progress would always cause a surge in population that wiped out any advantages brought by the improvements. Susskind, however, argues that Malthus was broadly correct. As Paul Krugman has written, ‘he was right about roughly 58 out of 60 centuries of civilisation … the two centuries he was wrong about were the two centuries that followed the publication of his work.’

From: John Lanchester · Short Cuts: Labour’s Straitjacket.

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the UK economy has a persistent problem with productivity which nobody understands and nobody knows how to fix

From: John Lanchester · Short Cuts: Labour’s Straitjacket.

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The life of most people in 1800 was no better, and in some demonstrable measures worse, than that of a hunter-gatherer in 100,000 bc. Malthus has had a terrible press for predicting that material progress would always cause a surge in population that wiped out any advantages brought by the improvements. Susskind, however, argues that Malthus was broadly correct. As Paul Krugman has written, ‘he was right about roughly 58 out of 60 centuries of civilisation … the two centuries he was wrong about were the two centuries that followed the publication of his work.’

From: John Lanchester · Short Cuts: Labour’s Straitjacket.

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Thirty per cent of Gen Z — those aged between 18 and 27 — began investing in capital markets at university age compared with 15 per cent of millennials, and 5 per cent of baby boomers, according to the poll, which surveyed 13,000 people across 13 countries, including the US, UK, Brazil, China and India.

Experts say investing has become increasingly popular among young people, driven by the emergence of mobile apps that charge little to no commission and the abundance of financial content available online. In the UK, 64 per cent of Gen Z investors review and adjust portfolios at least once a month compared with only 34 per cent of baby boomers, the WEF found.

However, policymakers and regulators worry that too many are making their first foray into investing through cryptocurrencies. The UK’s Financial Conduct Authority said on Tuesday that there were “several million” under-35s in the country whose first investment was in crypto, despite the “very high risk that you could lose all your money”.

From: A third of Gen Z invest by ‘early adulthood’, poll finds.

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Digital wallets for initiating and receiving real-time A2A payments are the future of the payments industry and how we pay across the world.

From: (4) What’s Going On – by Jeremy Light – Agenda: Payments.

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