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SXSW, fintechs and the next revolution

Sutor Bank's Hartmut Giesen explains how blockchain and AI are changing financial sector

Talk of the ending fintech revolution can be found in writing and in oral sources and SXSW was proof thereof to an extent. Although SXSW’s Startup-Accelerator-Programm featured a fintech track, few such events were held and varied in quality, according to more advanced fintech geeks. However, non-fintech specialists, who accounted for the overwhelming majority of delegates at SXSW, may beg to differ.

Blockchain and artificial intelligence – dominant themes

Recently returned from SXSW, this author attended Handelsblatt’s annual meeting focusing on retail banking. There, Christian Nagel, of the venture capital investor, EarlybirdVC and who has invested in a whole series of fintechs, said: “The real fintech revolution has yet to come and will arrive when artificial intelligence and blockchain hit the sector fully.” SXSW evidenced that forecast. Blockchain as a carrier of bitcoin is clearly rooted in fintech and in AI even moreso. It felt as though half of all sessions in Austin revolved around the latter theme. At stake is not only the use in a financial context, but also the economic, social and business consequences – across all sectors and life spheres, which is typical of SXSW.

Blockchain as a world-changing technology

Blockchain, developed as the technology for the cryptocurrency bitcoin, is of the highest strategic value as well as the depth of the technical details. During an event in one of the biggest conference halls at SXSW, Josef Lubin, co-founder of the blockchain technology called Ethereum, recently talked about it’s world-changing power and not only for the financial sector.

The venue had been reserved for top digital acts and major questions of the future. Developers of blockchain exchanged views on programming languages and software architecture in their sessions.

Controversial corporate financing ICO

The blockchain issue of Initial Coin Offerings (ICO) proved particularly controversial. Starts-up are accumulating large amounts of money through ICOs at present although the inherent use, legal and asset value of these coins is not always clear. Investors are just hoping that these coins increase in value and that they can sell them at a profit – similar to a share (a share means partial ownership of a company). Opinions on ICO vary from “80 per cent who say they are fraudulent” to those who say, “they will revolutionise corporate financing.”

Calls for stricter regulation

Banks have noted the value of (and the threats posed by) blockchain. Instead of waiting for fintechs to appropriate the innovation, banks are investing massively therein themselves. The large U.S. bank J. P. Morgan held a noteworthy presentation of it’s blockchain initiative in one of the largest conference halls in Austin as well.

Nearly all critics and fans of blockchain agreed that financial blockchain deals, for use as an original digital currency to raise capital via ICOs, requires more stringent regulation as the only means of mitigating abuse and fraud and allowing the technology to become an “Internet of Values”. However, regulations should not prove deterrents to opportunities for achieving a more decentralised economy and society.

Long-term impact of AI and blockchain

During SXSW, blockchain’s long-term impact on the financial sector and on many other life spheres and business sectors became clear. The music sector and the movie industry also negotiated possible uses of blockchain e.g. for managing copyrights intensely in the dedicated sections of SXSW.

Artificial intelligence is conceded to have even greater potential to change than blockchain, when commerce, society and politics are viewed as an entity. However, the universal applications of artificial intelligence were and are wide-ranging. As a result, a discussion about AI in a financial context did not take place during this year’s SXSW. That will probably be the fintech theme of sessions at SXSW next year.

Guest commentary by Hartmut Giesen, Business Development Manager at Sutor Bank

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