Generative AI: 100 practical uses and know the risks; Loyalty in banking? What loyalty!; CBDC the solution to privacy not the dystopian end!
Demand offline CBDC payments!
1. 100 practical uses for generative AI
2. Generative AI: know the risks
3. Loyalty in banking? What loyalty!
4. CBDC the solution to privacy not the dystopian end!
5. Demand offline CBDC payments!
Today’s art: Lake Barcis, Province of Pordenone, Friuli-Venezia Giulia, Italy. Lago Barcis is famous for its emerald-green water and backdrop at the foot of the Dolomite mountains. The message of this picture is simply to enjoy the beauty of life whenever you can. A beautiful day, friends, and a lovely lunch at a hillside rifugio.
Personal note: I am writing from Italy. Please expect shorter newsletters, and forgive poor editing!
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1. 100 practical uses for generative AI
100 Practical use cases for Generative AI you need to know that will show why it shouldn't be underestimated!
Download: here
This report from the UAE kept me glued to it for about an hour, and I read it from cover to cover! I loved it, and I hope you do to.
What it does better than any I’ve seen is tell us exactly what we can use generative AI for now. The report even includes the prompts required to achieve the stated uses.
This is an atypical article from me, but I thought it was fun and instructive. My favorite was use case No.6, putting Youtube transcripts into ChatGPT. This solves a real problem for me!
While the list is undoubtedly not exhaustive, it is the first I’ve seen that takes me case by case through generative AI’s many uses and strips away some of the mystery.
Learning how to get ChatGPT to achieve these feets requires understanding the prompts. By cutting, pasting, and filling in a few boxes, you can examine ChatGPT prompts and the system’s output.
My experience with generative AI for making images for my newsletter has been overwhelmingly positive. For the first time, I can create images that capture the essence of my stories. I love it, though I haven’t given up on classic art.
So far, I have yet to use Generative AI on anything written here on LinkedIn or elsewhere. As a pro writer, why would I?
Still, a cautionary story is required. My brother-in-law is a professor and recently came home excited, having asked ChatGPT a very long and pointed research question. ChaptGPT promptly sent him references to three research papers just before leaving the office to come to dinner. He was delighted and told us over dinner how ChatGPT was brilliant in uncovering research that he had missed.
At dinner the next day, his opinion of ChatGPT was very different. He wanted to send the research papers to his staff and tried downloading them in the morning. He put in the reference numbers for each paper; all three were non-existent! It turns out that ChatGPT made up all three research papers!
Clearly, the generative AI revolution has a ways to go, but with hands-on use cases like these, you’ll get a better idea of just how capable it is. That is, of course, if you can spot the occasional lie.
Lies aside, we should not underestimate generative AI and learn about it now before it's too late.
Thoughts?
Takeaways:
—Enjoy scanning the use cases provided in this paper.
—Look carefully at the prompts, which in some cases are quite tricky.
–While undoubtedly disruptive, I don’t see generative AI as either the downfall of humanity or the second coming. Still, I don’t underestimate its disruptive power!
2. Generative AI: know the risks
Generative AI, know the risks first!
Download: here
KPMG looks at generative AI, and does a sobering job of breaking down the risks!
We've all read about the rewards for months, but lawyers are gearing up to bring risk to the fore.
The risks are something banks will have to think a lot about as they use AI for personalization.
KPMG breaks out the top 9 things you should know:
1. The most common generative AI solutions can roughly be divided into five categories: content generators, information extractors, smart chatbots, language translators and code generators.
2. Generative AI models can summarize articles, draft emails and produce images and videos. Trained by humans, some generative AI models have the conversational skills to, for example, answer follow-up questions, admit mistakes, challenge incorrect assumptions, and filter or reject inappropriate requests.
3. ChatGPT is a chatbot trained on human instructions. Its initial underlying large language model, GPT-3.5, had 175 billion parameters and was trained with more than 1 million datasets or 500 billion tokens.
4. Generative AI models have use across various business functions, from IT, human resources and operations to finance, audit, legal and marketing. Suitable applications include drafting proposals and developing and testing code.
5. Generative AI takes data inputs or parameters to learn and build knowledge. 💥Unless you explicitly restrict the application provider from doing so, that data may then be used to answer a prompt from someone else, possibly exposing an organization’s proprietary information to the public. Depending on the application, you may also be signing over your copyrights.💥
6. Depending what you use generative AI for and how you implement it, 💥your activities could expose intellectual property or trade secrets and open your organization up to fraud risk.💥
7. 💥Copying AI-produced information or code into any deliverable or product may constitute copyright or other intellectual property infringement.💥 This could potentially cause your organization legal and reputational harm.
8. We expect both open-source and boutique versions of generative AI will continue to be integrated into many common applications, systems, and processes, ranging from internet browsers to AI-connected technology that organizations license.
9. Creating safe usage guidelines within your organization is key to helping ensure proper and effective use of generative AI applications.
Thoughts?
Takeaways:
—Use generative AI with care.
—Don’t infringe on IP.
—Don't leak data.
—Don’t get sued.
3. Loyalty in banking? What loyalty!
Loyalty in banking? What loyalty? There is none with the widespread unbundling of banking services!
Download: here
Loyalty in banking? There is none with the widespread unbundling of banking services!
Bain produced a great report on loyalty in banking, making it clear that more than pursuing better digital services and free toasters is needed!
Key points:
🔹 Neobanks appeal to all ages
Traditional banks still claim the majority of primary relationships with consumers. But most markets have experienced a rise in neobanks, and younger generations have more primary relationships with digital-native banks. Older consumers are also signing on with neobanks and other direct banks.
–Are you surprised by this? If I read another article about Gen Z and banking, I will be sick. Good banking is not age dependent!
🔹 How unbundling plays out in payments
The ways that people pay for things are fragmenting, leaving banks at further risk of losing relevance in customers’ daily lives, along with the loss of transaction data that accompanies a payment.
–In developing nations, this is severe. Banks ignored citizens who gained financial inclusion from payment apps. In developed nations does Apple's savings account sound like a threat?
🔹 Make digital channels easy and convenient
Our survey highlights how the slightest friction in banks’ digital sales process degrades consumers’ perceptions of the overall relationship with the bank, prompting many of them to switch to a competitor. The 103-point NPS® spread between respondents who successfully opened an account digitally on their first attempt and those who could not open the account and chose a different bank is remarkable.
–Agree that the worst experience is wasting time on digital sign-ups only to be denied!
🔹 Tailor to the person
Consumers have grown accustomed to personalized services and marketing in many industries, heightening expectations for banks. Indeed, the more our survey respondents agree that their bank personalizes the relationship, the higher NPS they give it.
–Do I need to talk about ChatGPT?
🔹 Ramp up ESG initiatives and awareness
For many customers, the steps their bank is taking to advance ESG goals can influence engagement, as consumers’ perception of the bank’s ESG activity correlates with their advocacy of the bank.
—Look at banks catering to farming or LGBTQ+ communities for an example of sharing values beyond ESG!
Thoughts?
Takeaways:
—Bank loyalty is low and falling with the worldwide unbundling of bank services.
—Loyalty is particularly low In developing economies with payment apps.
—Better digital services are helpful but cannot compete with better prices, convenience or values.
4. CBDC the solution to privacy not the dystopian end!
CBDCs are the solution to "non-existant" digital payment privacy not the dystopian end.
Download: here
The European Data Protection Supervisor is clear that a well-designed CBDC with anonymity under a threshold value would be a “unique opportunity for citizens…as anonymous cashless payments are inexistant currently.”
Let me say it once again, CBDCs will offer far better privacy than the cards you are using now!
Key points:
🔹 Privacy in payments risks to be diminished!
💥 “Private digital payment solutions available in the market enable an increasing data exploitation, leading to a reduction of anonymous payments. 💥
🔥 Anonymity under a certain threshold can become a clear unique feature for the token- based CBDC solution (which is a bearer-instrument like banknotes), differentiating it from all the other private digital payment methods used by citizens.🔥
🔥This would be a unique opportunity for citizens, as secure, stable and anonymous cashless payments are inexistant currently.” 🔥
🔹 Privacy and data protection issues in payments can be exacerbated by certain design choices
Complexities would emerge in case distributed ledger technologies are involved in the development of a CBDC, especially for what concerns data minimization and storage limitation principles due to the add-only and ever-growing nature of a blockchain.
🔹 The adoption and use of CBDC on people’s private life might not fulfil the requirements of necessity and proportionality
For example, as is the case for non-CBDC use, anti-money laundering, anti-terrorism financing and anti-tax evasion laws require specific processing of personal data. The particular design and features of a CBDC can result in a specific risk profile in the anti-money laundering and anti-terrorism financing context, different from the one existing for other means of payments and cash.
🔹 Systemic risks of profiling and surveillance are present [ My take: "Trust but verify"]
Specifically, in the CBDC domain, this risk is connected to design choices. For example, a design that does not allow central banks to process personal data or that implements strict data minimisation might avoid or reduce the risks for privacy involved in the current payment systems.
Thoughts?
Takeaways:
—CBDC is the answer to ever more invasive payment data collection, not the problem.
—CBDC design is critical, but with CBDCs where the ECB and BoE don’t have your data, greater privacy than cards can be attained.
—Never forget that data brokers buy and sell your payment data. CBDCs won’t.
—"Trust but verify" is key to CBDC design acceptance.
5. Demand offline CBDC payments!
OFFLINE CBDC PAYMENTS ARE SO CRITICAL EU AND UK CITIZENS SHOULD DEMAND THEM!
Download: here
The BIS Nordics Innovation Hub tackles offline CBDC payments!!
Offline payment is CBDC’s defining feature and promotes “inclusion by design.” Without it, CBDCs are wasting a prime opportunity not just to serve the vulnerable but to make payment systems more resilient.
Offline payments are a touchy subject. Every time I discuss them there are cries that: 1) It can’t be done, 2) It is unnecessary.
–Saying it can’t be done is simply bunk. China already does it! Apart from China, Germany’s G+D is trialing offline payments in its CBDC for Ghana’s and France’s Idemia also has functioning solutions.
–To show how necessary offline payments are, we only need to think about financial inclusion for the elderly and the digitally disconnected.
With 70% of sub-Saharan Africa offline, it's a key feature for inclusion which is touted as CBDC’s “raision d’etre.”
Closer to home, some in your family may not have a smartphone, have impairments, or live in rural areas with unreliable signal. Offline CBDC cards will be a lifesaver for these groups and allow CBDCs to more closely replicate cash.
This is why EU and UK citizens MUST demand offline transfers!
Three types of devices can make offline transfers:
1️⃣ Secure element (SE)-based
Hardware based-solutions are based on tamper-resistant chips, for example those commonly used in EMV payment cards. Some smartphones may contain a secure element, although not all do.
2️⃣ Trusted execution environment (TEE)-based
Many smartphones contain a trusted execution environment (TEE), which is a means of enhancing the security of mobile devices. The TEE is a part of the smartphone hardware that allows software applications installed on the device to securely execute code.
3️⃣ Secure software-based
Software-based solutions are typically smartphone-based and use a range of software techniques to protect cryptographic keys and data.
–In designing an offline system, central banks can pick several systems. China has specific SE hardware devices and software-based solutions running on smartphones.
–The big question is that since offline transfers closely mimic cash, how can gov’ts ensure that AML/KYC is included?
China’s solution was to reduce transaction sizes to small but useful amounts for private use. The UK and EU will likely make similar compromises.
Thoughts?
Takeaways:
—Offline transfers represent “inclusion by design” for CBDCs!
—All EU and UK citizens should demand offline transfers on the digital euro and pound!
—The technology works. Stop saying it isn’t possible.
—Gov'ts will need to compromise on KYC/AML.
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
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