Nicola Medicoff from St Paul’s Girls School, Hammersmith is the runner up in the Bank of England/Financial Times schools blogging competition. In her post, she looks at how fintech might reshape the banking industry…
Six years after setting up shop in London, ride-hailing app Uber has a fleet of 40,000 drivers doing battle with Black cabs, upsetting an industry that has seen little change since Hackney carriages started in the 1650s. Banks are bracing themselves for a similar assault, in their case from small fintech start-ups and large technology groups. Are the banks’ fears justified?
Continue reading “Facebook bank anyone?”
Anna Orlovskaya and Conor Sewell
Peer to Peer (P2P) lending is a hot topic at Fintech events and has received a lot of attention from academia, journalists, various international bodies and regulators. Following the Financial Crisis, P2P platforms saw an opportunity to fill a gap in the market by offering finance to customers and businesses struggling to get loans from banks. Whilst some argue they will one day revolutionise the whole banking landscape, many platforms have not yet turned a profit. So before asking if they are the future, we should first ask if they have a future at all. Problems such as a higher cost of funds, or limited ability to scale the business, may mean the only viable path is to become more like traditional banks.
Continue reading “Peer to Peer – Scale and Scalability”
Smartphone apps and newsfeeds are designed to constantly grab our attention. And research suggests we’re distracted nearly 50% of the time. Could this be weighing down on productivity? And why is the crisis of attention particularly concerning in the context of the rise of AI and the need, therefore, to cultivate distinctively human qualities?
Continue reading “Is the economy suffering from the crisis of attention?”
Aidan Saggers and Chiranjit Chakraborty
Investment in the Financial Technology (FinTech) industry has increased rapidly post crisis and globalisation is apparent with many investors funding companies far from their own physical locations. From Crunchbase data we gathered all the venture capital investments in FinTech start-up firms from 2010 to 2014 and created network diagrams for each year.
Continue reading “Bitesize: Flourishing FinTech”
Chiranjit Chakraborty and Andreas Joseph
Rapid advances in analytical modelling and information processing capabilities, particularly in machine learning (ML) and artificial intelligence (AI), combined with ever more granular data are currently transforming many aspects of everyday life and work. In this blog post we give a brief overview of basic concepts of ML and potential applications at central banks based on our research. We demonstrate how an artificial neural network (NN) can be used for inflation forecasting which lies at the heart of modern central banking. We show how its structure can help to understand model reactions. The NN generally outperforms more conventional models. However, it struggles to cope with the unseen post-crises situation which highlights the care needed when considering new modelling approaches.
Continue reading “New machines for The Old Lady”
What type of technology would you use if you wanted to create a central bank digital currency (CBDC) i.e. a national currency denominated, electronic, liability of the central bank? It is often assumed that blockchain, or distributed ledger technology (DLT), would be required; but although this could have some benefits (as well as challenges), it may not be necessary. It could be sensible to approach this issue the same way you would any IT systems development problem – starting with an analysis of requirements, before thinking about the solution that best meets these.
Continue reading “Beyond blockchain: what are the technology requirements for a Central Bank Digital Currency?”
Proponents of private cryptocurrencies argue they are a better store of value than traditional “fiat” currency. But even if a cryptocurrency’s value cannot be inflated away by large supply increases, that doesn’t automatically mean its value is stable in terms of ability to buy goods and services.
Continue reading “Bitesize: The very volatile value of cryptocurrencies”
The topics of central bank digital currency (CBDC) and distributed ledger technology (DLT) are often implicitly linked. The genesis of recent interest in CBDC was the emergence of private digital currencies, like Bitcoin, which often leads to certain assumptions about the way a CBDC might be implemented – i.e. that it would also need to use a form of blockchain or DLT. But would a CBDC really need to use DLT? In this post I explain that it may not be necessary to use DLT for a CBDC, but I also consider some of the reasons why it could still be desirable.
Continue reading “Central Bank Digital Currency: DLT, or not DLT? That is the question”
Mauricio Armellini and Tim Pike.
This post highlights some of the possible economic implications of the so-called “Fourth Industrial Revolution” — whereby the use of new technologies and artificial intelligence (AI) threatens to transform entire industries and sectors. Some economists have argued that, like past technical change, this will not create large-scale unemployment, as labour gets reallocated. However, many technologists are less optimistic about the employment implications of AI. In this blog post we argue that the potential for simultaneous and rapid disruption, coupled with the breadth of human functions that AI might replicate, may have profound implications for labour markets. We conclude that economists should seriously consider the possibility that millions of people may be at risk of unemployment, should these technologies be widely adopted.
Continue reading “Should economists be more concerned about Artificial Intelligence?”
My earlier post arguing that robotisation wouldn’t destroy jobs, slash wages or drastically shorten the working week prompted many thoughtful responses. Richard Serlin and others countered, arguing that if automation affects all sectors, then displaced workers may have nowhere to go. Others asked if the sheer scale, speed and scope of robotisation might make it much more disruptive. Or if wages fall, who will be able to buy the extra output? And Noah Smith raised the prospect that robotisation might eventually differ from earlier waves of innovation by replacing rather than complementing human labour. This post attempts to respond to those points, expand on the original post and explain why I’m still relatively relaxed about robots.
Continue reading “Fish and (micro)chips: Why I’m relatively relaxed about robots”