The AI Cataclysm: The Doom of Traditional Banking

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Welcome to The Menu Magic - Finance & AI newsletter

Every week, we will deliver expert insights, in-depth analysis, and curated content to your inbox, helping you navigate the rapidly evolving landscape of AI in finance.

In today’s email:

• The AI Cataclysm: The Doom of Traditional Banking

• I've Found an Amazing Guide: Build Your Own ChatGPT App Visually!

• Applications Now Open for the Mexico City Founder Institute

Hey there, my friend,

I hope you're doing well and that your business is thriving! I came across an interesting piece from Bain Capital Ventures that I thought might intrigue you, especially given how much we've been talking about the influence of AI in various sectors.

So, you remember those history lessons about Attila the Hun, right? The guy who led to the downfall of the mighty Roman Empire? This article likens the impact of a new AI technology, generative AI, to that of Attila. It suggests that the banking sector is in for some major disruption, much like the Roman Empire was centuries ago.

The writer of the article paints a fascinating picture. Imagine the banks as the Roman Empire, resilient and strong, and the disruptive technologies as the barbarian tribes. Banks, like the Romans, have been surviving by incorporating these "barbarian" fintech companies. But history tells us the Empire eventually fell, and the writer warns that banks could face a similar fate.

Now, Attila, the fearsome leader of the Huns, never physically entered Rome. But that doesn't mean he didn't have a massive influence. He posed a significant threat to the Roman Empire from the East, which ultimately led to the mobilization of various tribes against Rome. Attila didn't need to cross the Po River himself; his mere existence was enough to cause a stir, a ripple effect if you will, leading to the eventual collapse of the Empire. He was like a catalyst, accelerating a reaction that had been poised to happen for a while.

Let's bring this analogy to our modern-day situation. The banking industry is like the Roman Empire - strong, established, and seemingly unshakeable. However, the world is rapidly changing. Technological advancements, such as generative AI, are beginning to pose a significant threat, much like Attila did in his time.

Now, here's where it gets interesting. Last year, there was a crisis in the banking world. Banks, during the COVID era, had accepted a ton of deposits and invested them in long-term assets. However, when rates shot up unexpectedly, the value of these assets fell, leading to a panic that caused the failure of three major banks. While that crisis has somewhat subsided, the writer hints at a new challenge - the rise of generative AI that could significantly impact the banks' profits.

Generative AI, my friend, is essentially AI that can create new content or responses - think of those chatbots that companies use to interact with customers. Some banks are worried that these chatbots might give incorrect advice, but the article suggests a more significant concern - that these chatbots might start giving unbiased, honest advice. Imagine a chatbot telling a customer how much they paid in hidden fees last year and suggesting they might get a better deal elsewhere!

The same could happen in retail banking. A chatbot might advise a customer they could get better rates and fewer fees at a different bank. The writer criticizes banks for being too complacent, relying too much on customers' reluctance to switch banks, and offering subpar services.

But change is afoot, my friend. It's becoming easier for customers to switch banks, thanks to something called open banking. Money transfer is becoming faster, and generative AI-powered services can help customers understand their finances better, even automating tasks like opening accounts and transferring money.

In essence, generative AI is becoming the Attila to the banking industry's Roman Empire. It doesn't need to destroy the system itself; its mere presence, and the changes it brings about, could be enough to shake the foundations and lead to a significant transformation.

So, my friend, as you navigate the waters of the business world, it's worth keeping an eye on these potential disruptors. Just like the tribes that ultimately overthrew Rome, who knows what challenges - or opportunities - they might bring.

This means that banks will need to up their game. They will have to offer better rates and reduce fees to keep their customers. Generative AI, much like Attila the Hun, is set to shake up the banking industry as we know it.

I've managed to gather a few intriguing insights from this article.

It's a bit ironic, but the real concern is not the chatbots going rogue and giving out bad advice. Instead, it's the possibility of them speaking truth to power! Imagine a scenario where an AI chatbot advises a client not to invest in your bank because your rates are inferior compared to a competitor. Now, that's a chilling prospect, isn't it? So, what can we do? Let's get proactive and focus on providing the best services and rates, so our chatbots become our champions, not our critics. Let's leverage AI, not dread it.

Gone are the days when they'd stick with us out of loyalty or convenience. Today, they can shift their entire banking relationship with just a few taps on their screens. So, let's not rest on our laurels. We need to reinvent ourselves, be more competitive with our rates, and invest in cutting-edge technology that not only meets but exceeds customer expectations. There's a whole world of opportunities out there if we're ready to adapt and innovate. Let's seize them together.

I found it fascinating and thought you might too. You can read the article here!

So, after delving into the world of generative AI and its potential impact on banking, what's your take on it? Do you perceive it as a storm brewing that could bring about the downfall of traditional banks, or do you see it as a golden opportunity for a transformative leap in the banking industry?

Hey there!

I'm constantly looking for ways to make our digital lives simpler and more exciting. And guess what? I've stumbled upon an incredible tutorial on Twitter that's definitely worth sharing. It's a gem for tech enthusiasts, budding developers, or just about anyone who loves exploring the digital realm.

The tutorial offers a step-by-step guide to creating a ChatGPT app, which can extract content from any website and convert it into an interactive chatbot for your own website. And here's the clincher - you don't need to write a single line of code!

I am excited to announce that applications are now open for the Founder Institute Mexico City Fall 2023 cohort! FI is the most proven network to turn ideas into fundable startups. Our 7,000+ alumni have raised over $1.75B and are valued at over $30B. We plan to continue this success with the Mexico City cohort.

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I'd love to hear your feedback on today's newsletter! Is there a specific type of content you'd like to see more of in the future? Since I'll be releasing a new edition each week, I welcome any suggestions or requests you may have. Looking forward to hearing your thoughts!

The Menu Magic is written by Francisco Cordoba, a Fintech entrepreneur living in London. MIT Innovator, Edmund Hillary Fellow, St. Gallen Leader of Tomorrow. Erasmus Mundus scholar. BA in Business. Zinc VC Entrepreneur in Residence.

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