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Banks Use of AI to Manage Credit Risk Tripled In the Last Three Years

Banks are using artificial intelligence or AI more than ever to interact with customers. Banks can use AI to produce chatbots that let banks interact with people at any time. They can also use AI to identify fraud and other potential threats. It can even work for mobile banking purposes, as banks can help customers send money to other accounts based on signals and reports they receive.

One other way banks are using AI involves how they can review customers’ credit risk. Banks are often willing to extend credit to customers, but they need to choose the right people to support. Failing to give support to customers that can afford a bank’s services can lead to defaults and other financial issues.

Credit card delinquencies have increased in the past year. People are also struggling to pay off their loans, especially as they struggle to find stable work. But an AI-powered system can help banks review customer data and identify the potential credit risks they hold. AI can analyze prior user data, transaction reports, and credit histories to see if some people are likely to become insolvent or otherwise unable to pay off their loans or other investments.

AI can also identify fraud risks and ensure they do not occur. AI can check on how customers behave and compare that data with prior fraud reports to spot when someone might be engaging in questionable activities with one’s funds.

The AI effort helps banks find the right people to support. AI increases the bank’s potential to earn revenue without adding to its risk.

AI also reduces the unpredictability surrounding the banking industry. Clients are more unpredictable than ever before. It becomes tough for some people to figure out who is right for lending purposes. AI helps identify unique trends and habits in people, ensuring their behaviors are easier for everyone to predict. It becomes easier to confirm certain things when AI works well.

Managing AI In a Time of Uncertainty

The 2021 calendar year will be a time when the economy gets back up and running and people start to find jobs once again. Government stimulus programs have also helped keep the economy moving. But many banks and other financial institutions are uncertain as to what will happen soon.

The uncertainty surrounding the economy has made banks worried about how they can provide lending services to customers. With this in mind, AI can identify possible concerns surrounding who gets funds through loans.

Handling Data From More Sources

It used to be that banks would have more personal relationships with their clients. Local branches would understand each person’s distinct needs and find banking solutions that fit what they demand. But the banking sector has seen some dramatic changes in the last few years, as data is coming from many sources. People are completing more digital transactions than ever before. Some people even have their funds secured in multiple spaces, including separate spots for their 401ks or IRAs.

AI-based systems can collect data from multiple sources. They can gather data from different service providers, online networks, and even blockchain-based systems. The information helps these banks find details on each client while reducing possible fraud or insolvency risks. Banks can attain more revenue while reducing their costs by using AI to automatically review each customer’s financial profile through many confirmed sources.

Working With Data Mining

Banks with at least $100 billion in assets are more likely to utilize AI to review risky customers. But AI use has become common among smaller banks as well. Part of this comes from how AI works alongside data mining processes. Data mining has been in use in the banking industry for a while now, as it helps identify unusual patterns and shifts in large data sets. The mining effort helps banks review ways they can increase their revenues and reduce costs.

AI systems can incorporate data mining in their processes to help them stay functional. It can review massive data sets used in the data mining function and incorporate the mining results into its research database. The AI can then use those details to identify possible threats and opportunities surrounding people who want to borrow funds from the bank.

What People Use AI For Today

Banks are using AI to manage many risk mitigation efforts. Some of the things that AI is being used for include:

  • Identifying discrepancies in data entries, especially for new accounts or files
  • Helping to make credit decisions for applicants
  • Underwriting for credit risks
  • Finding solutions to possible credit problems clients may hold

The AI can work with data mining results and prior reports to see what can work. AI makes it easier for banks to ensure these systems work well.

Interacting With Customers

AI can also interact with customers who want to apply for banking services. AI systems can reach these customers through multiple processes:

  • An AI system can provide quick answers on a website based on a customer’s behavior. The AI could review one’s online actions and provide responses to search queries and other actions.
  • Chat-driven communications may also work. Chatbots are prominent AI examples for how they can read language notes and identify demands for info.
  • Customers can also enter emails that illustrate their concerns. An AI system can produce an automated response based on unique keywords someone enters, the tone of the message, and other points surrounding the writer’s needs. The work ensures the customer will get the answer one requests sooner.

Artificial intelligence is necessary for helping banks find the right people to support for investment purposes. AI will do well for many investment purposes, making it a suitable solution for everyone to follow. People will continue to express various risks for banks to review, so it is essential to watch for what might happen.

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Would You Buy a Non-Fungible Token? Understanding What You’re Buying

The odds are you may have heard about non-fungible tokens or NFTs lately. People are selling these NFTs to others and are making significant amounts of money from these sales.

NFTs entail sales for various virtual objects, from videos and audio files to social media messages. But while you can buy an NFT, that doesn’t mean you’re going to own something outright and prohibit people from buying or selling that item.

The concept of the NFT is confusing in itself. What is an NFT, and why would someone buy the rights to that video of a guy skateboarding while drinking cranberry juice with Fleetwood Mac playing in the background? Here’s a brief guide to help you get through the clutter.

What Is An NFT?

A non-fungible token or NFT is a digital ownership certificate. The token states that you are the sole possessor of a digital item. The digital content could be anything from a GIF to a message on Twitter.

The digital content can still be copied and reproduced as people wish. But by owning an NFT, you are confirming you’re the owner of the original copy.

You can prove your ownership because the NFT links to a blockchain. The blockchain will record your transaction and confirm you are the original owner of something. Each NFT has a unique blockchain that traces the ownership of the item.

Each NFT works on the Ethereum blockchain system. The Ethereum setup provides a decentralized approach to tracking data.

In short, you will claim by buying an NFT that you are the owner of something. But that doesn’t mean you are the only person who can use that item. There is still a potential for the value of your NFT to rise after a while, although there are no guarantees this will happen.

What Does An NFT Cost?

The value of a non-fungible token will vary surrounding whatever you purchase. Some groups have been selling NFTs for cheap. The National Basketball Association has an NFT product called Top Shot that lets you trade digital cards that play videos. People can purchase digital cards highlighting their favorite NBA players. These cards work as NFTs and are available for a few dollars.

But some NFTs can end up becoming extremely valuable. Some digital cards in the NBA’s Top Shot program have traded for tens of thousands of dollars. These include cards showcasing LeBron James, Ja Morant, and Zion Williamson laying down slam dunks.

The most noteworthy example of a high-value NFT comes from Everydays: The First 5,000 Days, an image file created by an online artist known as Beeple. The NFT sold at an auction for $70 million. Twitter CEO Jack Dorsey also sold an NFT of his first tweet on the platform for a few million dollars.

Are These NFTs Functional?

There’s a potential that many NFTs may be functional for things other than collecting. The NBA’s Top Shot NFT program may be utilized for gaming purposes soon. The NBA hopes these NFTs can be collected and used by people in upcoming tournaments for a planned mobile game.

Another example comes from filmmaker Kevin Smith announcing that his next film will be sold as an NFT. The move assumes that the only way people can watch his movie is if people purchase copies of that film as NFTs.

Intellectual Property Worries

As intriguing as NFTs may be, there is a worry surrounding intellectual property law. Many NFTs infringe upon intellectual property rights, as people are creating NFTs out of things they did not create.

For example, a person could take a piece of art someone created and posted online and then sell it as an NFT for one’s profit. The original artist might not have any control, nor would that person get any money from the sale.

There is no stopping people from engaging in intellectual property violations at this moment. People could accept NFTs as being viable if there was a way to keep these violations under control. How this point will work remains unknown.

People who create these NFTs can still respectfully alter their content to keep any properties they don’t own from being visible. You read earlier here about how someone could buy an NFT of a viral video showing a man skateboarding while drinking cranberry juice. That video was sold as an NFT for about $500,000. But the Fleetwood Mac song that was playing in the background is not included. The Ocean Spray brand name is also obscured from the cranberry juice bottle. These were removed to avoid any potential legal issues surrounding the band or the juice company.

The Negative Environmental Impact

One concern surrounding NFTs involves the environmental impact of these tokens. An NFT is stored on an Ethereum-based blockchain. The NFT will remain active as the Ethereum system continues to operate.

But the increasing rise of blockchain technology has required additional processing power to ensure all chains stay functional and active. The processing power produces significant amounts of energy. The effort triggers a substantial carbon footprint as a result.

The Ethereum system is planning on moving to a new power system later this year. The new setup will produce less energy, although it’s unclear how much of a reduction will happen. The negative environmental impact that NFTs could have on the world could keep it from being taken seriously in some places. It could keep NFTs from becoming more mainstream.

Should You Buy An NFT?

NFTs can be interesting and unique investments. But there are also problems surrounding how they will be accepted worldwide. It is hard to predict where the NFT market will go in the future.

You can buy an NFT if you wish, as many of them aren’t as expensive as you would assume. But be cautious when doing so, as purchasing an NFT can be risky. There are no guarantees the value of whatever you’re purchasing will rise. There’s also the potential someone might break ownership laws with an NFT.

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Square Buys $170 Million Worth of Bitcoin

Bitcoin continues to remain one of the most intriguing investments on the market. Bitcoin has seen a massive rise in its value in the past year. Its value has risen from $30,000 at the start of 2021 to nearly $50,000 in March. Bitcoin also had a record high value of about $57,000 in late February.

One of the largest American financial service providers around is doubling down on its support for Bitcoin. Square announced it had purchased $170 million in Bitcoin. The total equals approximately 3,500 BTC as of March 4.

Much of Square’s support for Bitcoin comes as Cash App customers have helped boost the company’s revenue. Cash App is a mobile payment system developed by Square. Cash App consumers have been trading Bitcoin more than ever, leading to Square doubling its revenue in the fourth quarter of 2020. Cash App helps facilitate Bitcoin transactions to make them easier to run, helping boost peoples’ involvement with the currency.

Square’s purchase is the second such move the company has made. Square purchased $50 million in Bitcoin in October 2020. The total was about one percent of their assets. The company purchased Bitcoin, believing it would be a more viable currency for future international transactions. Bitcoin had a value of about $12,000 at the time.

Bitcoin now makes up about five percent of Square’s assets. These include its cash, securities, and cash equivalents.

Square is the latest company to focus on Bitcoin to diversify its investments and to bring in a potentially higher return on its cash. Other companies like Tesla have been investing in these currencies in the last few years. Tesla particularly acquired more than $1.5 billion in Bitcoin in early 2021, making it where Tesla’s share price is directly linked to Bitcoin’s value.

But the rise of Bitcoin for Square and others comes at high risk. Bitcoin is one of the most volatile investment options on the market today.

Statistics For Square

Square reported a few prominent statistics for Bitcoin and its Cash App use. These points are parts of why Square has invested so much money in Bitcoin:

  • Square reported there were about 36 million monthly Cash App users as of December 2020.
  • At least a million Cash App users bought Bitcoin for the first time in January 2021.
  • At least three million Cash App users utilized Bitcoin payments on the app in 2020. These include people who either purchased or sold Bitcoin.
  • The company’s fourth-quarter revenue from 2020 was $3.16 billion. The total is more than double the $1.31 billion it had in the fourth quarter of 2019. The value is also slightly over the $3.1 billion forecasts from industry analysts.
  • At least half of the quarterly income came from Bitcoin.
  • Square had a minimal customer acquisition cost in 2020. The company spent less than $5 per user. The effort is a sign of the company’s viral marketing efforts helping make it easier for the company to reach more people.
  • More money is flowing through Square’s platforms from both its mobile payments and its traditional storefront kiosks. The gross payment value in 2020 was $32 billion, a $4.6 billion rise from the prior year.

Cash App has also shown it is more viable to Square than its traditional seller business platform. Square had slightly less than $1 billion in revenue from its seller business platform in the fourth quarter of 2020. Part of the move could be due to many physical stores not being open and people focusing on online payments. But contactless payments and the simplicity of Cash App have helped, especially as people become more invested in the currency.

Focusing on Simplifying Bitcoin Efforts

Bitcoin trades are easy to complete with Cash App. Square developed the app to help people transfer funds, and its cryptocurrency feature helps people acquire Bitcoin and others in moments. The company focuses heavily on ensuring people can acquire these currencies while also helping them learn more about how they work. By providing these details, trading efforts can become more viable and accessible.

Stimulus Checks Helped

One reason why Square saw a significant amount of activity in 2020 came as Americans used Cash App to pick up their government stimulus checks. Americans were using Cash App to facilitate the collection process and to ensure they had the funds they needed as soon as possible. The app’s ability to convert funds to Bitcoin and other cryptocurrencies also helped people become more aware of these currencies and how they function.

How Square Stock Is Changing

Square’s Bitcoin investment has helped the company’s stock value rise in the past year. Square trades on the New York Stock Exchange with the symbol SQ.

Square has a value of about $215 as of early March 2021. The stock value grew from $65 in May 2020 to $150 in October 2020. The value went over the $200 mark in November and has stayed over that total since.

Square reports that its net income went from $391 million in the fourth quarter of 2019 to $294 million in the fourth quarter of 2020. Much of this may be due to the increased infrastructure necessary for keeping Square operational. But the ongoing growth of Square and the increased value of Bitcoin will help the company continue to grow and become useful for traders to explore.

Are There Risks?

There is one risk associated with Square’s move. While Square feels confident in Bitcoin, it remains one of the most volatile investments on the market. Bitcoin has a potential to rise or fall by thousands of dollars in value each day. Any investor who is interested in Bitcoin or any other similar investment should watch for the risks associated with doing so.

But the growth of Square and Cash App through Bitcoin shows how appealing the currency will be for many. Expect Square to become a more prominent company as it continues to support one of the most noteworthy trends on the market.