Grow VC Group and its companies participated in Mobile World Congress in Barcelona in the last week. Here is a report of the highlights of the event, written by Jouko Ahvenainen. These reports were originally published on Telecom Asia.
Distributed models for AI and finance
Clouds have come to dominate computing and data services. At the same time there are more and more devices connected to the internet, devices have more data, make more real time actions based on data and users want to have more control. This all means that one totally centralized cloud model is not enough. We have to adopt more distributed - technically speaking Edge computing - models.
I have written earlier about personal AI and distributed data models. Both are demonstrations that there is a need to distribute data and its processing. Those services could still be cloud based, but if we really make real time, data heavy applications, then it is important to optimize local and centralized computing and data transfer. This is the case with many IoT based services.
Wikipedia defines Edge computing as “a method of optimizing cloud computing systems by performing data processing at the edge of the network, near the source of the data. This reduces the communications bandwidth needed between sensors and the central datacenter by performing analytics and knowledge generation at or near the source of the data.”
Professor Mahadev Satyanarayanan from Carnegie Mellon University made a strong case at an AI panel at MWC2018 for Edge computing and how its time is now. He basically gave examples that more personal AI (e.g. glasses to give personal assistant or connected cars) cannot transfer all data to a data center and wait for instructions from there. A part of the processing must be local. The training and learning of AI will probably be a hybrid model where there is centralized learning and ‘instructions’ that can be adapted locally in devices to be e.g. more personal or more relevant to the local context.
Professor Satyanarayanan gave four main reasons for why Edge computing is crucial for the future AI and ML applications:
We can see this is also linked to security. How, for example, local devices can protect themselves against attacks and be able to operate in all situations. These devices will need more firewall and other protected solutions in the future and maybe also use AI to protect themselves, in kinds of self-defense solutions.
This development to more distributed models will have business impacts too. It gives opportunities to new companies to develop optimal services for these new needs, when the cloud services start to be quite consolidated to the biggest players. Professor Satyanarayanan actually saw that most likely the leading cloud companies, like Google and Amazon, might have problems adapting to this model. He saw that Microsoft might have a better capability to do it, thanks to its history with PCs.
At the same time, this is a way that startups can really get to the AI market too, when for them it is really hard to compete with Google, Amazon and Facebook and their huge resources in AI.
Finance and FinTech services is one area where these new distributed models are already happening. We can say distributed ledger and blockchain are linked to the same development. It is to distribute the data, processing of transactions and offer more user control. As we can see in FinTech services, it is important to find an optimal model to manage global centralized ecosystems with local services and data. Open APIs are also a part of this model, when they enable to develop local services and applications that work with centralized services and back offices.
We will see different layers of computing and data centers:
At MWC2018 we can see AI models, needs and applications from many angles including computer science, venture capital investments and user applications (e.g. connected cars). The message from the AI expert is that this development is happening now, i.e. companies should invest in these things now, not first wait for proven business cases. The experts also wanted to emphasize that it is now the time to develop real user applications, not only conduct research, i.e. there are already enough theoretical models and research results to implement a lot of useful applications.
Distributed models have really started to emerge at the same time, when the big cloud services are still winning business from proprietary legacy IT solutions. This is an area where we will see a lot of new models and services in a few years, probably also a lot of startups and investments. The big players are also ready to make acquisitions. The development of connected digital services seem to be an endless rollercoaster between more centralized and more localized intelligence.
Data privacy, user control and AI ethics
Data has been an important topic at Mobile World Congress for many years. This is the case at MWC2018 too, but with some new angles and perspectives. Data privacy, user control of his or her own data, and ethics have become important topics in discussions. This is also linked to the development of AI, when machines are becoming more autonomous to use data and make decisions. This doesn’t happen only at MWC, but we can say the data business and discussion are stepping to a new era.
There are still many companies that are mainly talk, making promises about how they can collect more data than others and monetize it better. It can be mobile user data, advertising and content data or financial data, but these companies just want to offer better weapons to get to know customers and sell more to them. This was maybe a cool story 5 years ago. Today, not so much.
GDPR is on the way in the EU and other countries are working with similar initiatives. Users are more interested in how their data is used. Many international organizations, including European Council (e.g. Convention 108), UN (e.g. Resolution 68/167; The right to privacy in the digital age) and IEEE (e.g. P7002, work group for data privacy processes) are working with guidelines and standards to give more control to people regarding their own data.
It is no longer only about data and privacy. AI is changing the game, and it is also about AI ethics. With AI you have input and output data from the system, but also the algorithms that then process the data. Both data and algorithms can have a bias or ‘unethical’ components, and both of them are relevant when we talk about the rights of people and liabilities of companies.
Paula Boddington has conducted AI ethics research at the University of Oxford. She held a speech at MWC2018 and raised some interesting cases. She told about Microsoft’s chatbot (Tay) which became racist on Twitter and Microsoft had to close it down. Ms Boddington raised a question that it is not easy to answer - if we can blame AI on this, or was the underlying reason Twitter itself, i.e. tweets from people or peoples' behavior on Twitter. We can say social media seems to make many people behave like angry racists. Maybe AI just illustrated the real nature of social media behavior.
She also talked about the famous Milgram Experiment, where people at Yale University were asked to give electric shocks to people in another people, who’s audio they could hear, to help them to learn about ethical behavior. The voltages were increased all the time, and when instructed by their researcher, many people continued to give shocks at levels that were a threat to the life of the subject. Ms Boddington pointed out, that this illustrates, how people can get to unethical behavior step by step, without really realizing it. This might be the case with the use of data and AI too, and that’s why it is really important to discuss these topics all the time.
Of course, the work of academics and international organizations is not alone enough in this area. The reality is that lawmakers must create guidelines and companies must realize a business case to protect privacy and ethical use of data and machines. We can see now evidence that many companies are starting to see this. For example, in finance services MasterCard introduced a token model (MDES) to better protect the card user’s data. Blockchain and distributed models offer solutions to consumers to manage their own finance data (e.g. Prifina). Qualcomm, AT&T, IBM, Nokia, Palo Alto Networks, Symantec and Trustonic have formed a IoT cybersecurity alliance. And there are many other examples. Many companies also develop better digital identities, but they are still more complex to evaluate from a privacy point of view, when they can help and challenge privacy.
AI and data are gaining key roles in all industries. We must remember that intelligence is not only about the use data and making decisions; ethics is an important part of intelligence too. Now it is positive to see that more and more parties realize this and MWC2018 also illustrates this new era of data and AI business. Consumers need solutions to manage their own data and get AI to work for them. It is not only about individual people, but how data and AI can serve a common good and justice.
MWC still looking for a big picture of FinTech
FinTech is not the focus of MWC, but nowadays FinTech is somehow linked to many services, and definitely finance is entering mobile. In that way it is somehow surprising that FinTech hasn’t a more prominent role at MWC. There are components that help with FinTech on show, but a larger understanding and ecosystem point of view are missing.
Blockchain is a newcomer also at MWC. There seems to be a wild variety of scenarios where blockhain is planned to be utilized. Some companies have started to offer blockchain-as-a-service, some focus on managing ID or wallets with blockchain, and then there are models outside core finance services for smart contracts and data sharing. But as it is also with banks, not too many corporation executives know, what they mean, when they say they want to be active in blockchain.
Identification, KYC, mobile payments and wallets and money transfers are maybe the most typical FinTech services at MWC2018. All these components are relevant and they are needed in digital finance services. The surprising fact is that not so many of these providers have really thought, how their components are linked to other services and support a larger ecosystem to work smoothly. For example, mobile identification and payment services offer mainly their solutions for telcos and banks, but it sounds like they haven’t e.g. thought, how components of identification, KYC, AML, payment processing and wallets are linked to each other, data should be exchanged between them and you need all of them to offer secure regulated services.
Cashless has been the topic of several discussions. The conversation is not yet really about crypto currencies, but how to pay without cash. The market is quite divided, when the emerging markets are coming to cashless mobile payments, because they have no existing banking infrastructure, and the most developed countries (e.g. in Sweden and Canada over 70% of transactions are cashless) go to cashless thanks to their advanced infrastructure.
There were some interesting examples of how the cashless reality is built especially based on good usability and attractive services. Fenix International is a new kind of electricity company. It offers solutions such as the ability to manually or solar charge mobile phones and improve lighting in Africa. Mobile money and payments become important for them for offering use-based payment model for their products and services. They have expanded their offering to provide finance for paying school fees. In that way they develop financial inclusion and when they also collect data from customers, it helps them to evaluate credit ratings and offer more loans.
Transport for London, TfL, was another case talking about cashless payments at MWC2018. Their case is very different from Fenix, in a very advanced finance market. They started with their Oyster touch card payments almost 15 years ago, and nowadays they support payments with many debit and credit cards (that have a touch payment chip) and also with mobile payments, like Apple Pay. Many cities have proprietary payment solutions and cards for public transportation, but London’s case is important, how people can use their existing cards and payments solutions also with public transportation. Why would expensive proprietary solutions anymore make sense?
Regulation and compliance are always important parts of finance services, including payments. For example, you need to have KYC, if you really want to build a sustainable service, although one speaker made a good point “if you are really worried about KYC and AML, maybe then it would be better to focus first on Swiss banks than micro-payments in Africa.” It is important the regulators don’t make new important services too complex to implement.
One important aspect in a cashless panel was user experience, especially how to decrease fear and increase confidence in the use of new payment services. Many people are still worried, if new payment solutions are accepted, if they are secure and how they should really use them. This is linked to UX design of the services, but it is also important for service providers to provide more information to users.
Some experts made predictions that there could be a war between banks and telcos in the finance market. Telcos have a role to play in some finance services especially in developing countries. Typically, this is limited to payments and money transfers, and often these services are also implemented by a third party service provider. I have seen these predictions also earlier, and I still have a hard time believing them. As a whole banks offer a lot of services, and there will be many companies that challenge them with different services. The core banking services also require significant capital. Telcos have never been good to offer anything other than connectivity services to customers. Online and mobile services will change finance, but probably telco carriers’ role will be small in that disruption.
We can still say, as I have said earlier years too, that FinTech is component, not ecosystem, oriented at MWC. It is somehow surprising, when the finance system and new finance services are a huge new business and opportunity in mobile and all networks. There are lot of companies that offer advertising solutions at MWC, but actually finance services are often easier to make money with, because money is always a part of services in finance. Maybe in the next year we see FinTech has one focus area of MWC with a bigger picture emphasis on services and ecosystem.
Funnier side of MWC
Many people come to MWC to work hard, have business meetings and also participate in networking events. But as we know, each business, industry and event also has its more ironic parts. Especially if you have been to the event many times, you cannot take all things, announcements and comments too seriously. I was again curious about some things at the event.
Barcelona is a great place to eat with very nice restaurants, tasty food and reasonable prices for great food. But inside the MWC event, it is a totally different story. The catering has been outsourced to a company and its services and food puts me wondering about the deal every year. The main food offering is English style sandwiches (i.e. tasteless white bread and cheese) for €5.20. You get excellent sandwiches with actual taste in Barcelona downtown for €3 euros. The service at those event cafeterias is extremely slow, even the process to order a coffee is like from the Soviet Union to get a ticket and then walk to the next person, who shouts the order to the next person, and then after 5 minutes you get a latte, if you have ordered an Americano. This year’s extra was that their mobile payment terminals didn’t work, and the staff were walking around with them for a few minutes to get a connection to make the payment transaction. But howis it possible that the mobile payment terminals not work in the world's leading mobile event?
Sustainable Development Goals, SDG, were one of the main themes of the event in this year. Blockchain as a service was also a quite visible topic. There are several models to make blockchain services, but especially bitcoin type proof-of-work takes a lot of computing resources and electricity. For example, Kazakhtelecom said that their new business offering is blockchain as a service, because they have a lot of cheap energy available. According to the latest statistics, about 72% of electricity is generated from coal and about 5% from oil in Kazakhstan. I was just wondering, how sustainable a business is that, from an ecological or financial point of view?
The “next generation” SMS, i.e. Rich Communication Services (RCS), seems to be still one of those things operators want to create a big business with. They tell stories of how it is much better than native apps or chatbots for brands to communicate with consumers. Of course, they like it - when they can control them and make more money there than from apps. One more instance of carriers trying to get out from their bit pipe business. There was a panel about RCS and its opportunities. A marketing lady from British TV channel ITV told the crowd how excited she is about it, and Orange and Vodafone guys looked so happy. She compared moving from SMS to RCS to moving black-and-white TV to color TV. She was so excited that I was mainly wondering, what does she smoke, and does she know the color TV came 50 years ago, and now we have a thing called the internet, and even the mobile internet. Someone commented after the panel that RCS is an option for communications immediately after fax machine, pigeon and donkey.
IBM is very proud of their Watson AI. They tell how it helps manage big events, facility management and even predict problems with technical devices. So, I decided to go to IBM’s AI and predictive analytics sessions and indicated my intention also at MWC app. I went there, but I couldn’t get in, because they said it was overbooked and they cannot take more people in. I have learned also earlier about analytics, it is not really just to analyze data, but it is really about how you are able to execute and act based on your data and analysis. I think this experience told me a lot about IBM’s solutions to manage big events.
AI was an important topic at the show. There are always discussions about how much AI can really do and can it replace human beings. I always wonder about the passive crews many companies have at their booths at MWC. It is a big investment to be there. So, how can it make sense to have so many people there mainly tapping their phones or using their laptops, and even if you ask something, it is hard to get good answers. I was thinking that one place AI could really replace human beings is the staff at the booths in MWC.
Mobile and online advertising targeting is one exciting category at MWC. I mean, the exciting part is to understand, how it makes sense to have 1001 small companies there that tell, how they are better to target ads based on algorithm XYZ, and how they improve conversion by 7x. Especially this is exciting when the prices of online and mobile ads are now so low that it is hard for anyone to make significant business from it. Google and Facebook can do it with more than 1 billion users, but even with millions of users it is hard.
One of the best 5G comment came from F1 driver Fernando Alonso who was speaking in a panel. He said he has been doing it for 17 years, and his neck is used to it.
MWC has also mobile phones and some journalists that don’t understand other stuff there write stories about them. I also found myself one day at a huge stand that was full of mobile phones, but I have never heard about that brand. I asked the crew, what is this brand. They said the same company has also another brand, maybe I have heard about that one. No, I haven’t. Then she told me it is from China. I said it is unnecessary to say, when I know all big mobile brands I don’t know are from China. Then I walked to another big mobile phone stand, and found out, those phones were actually from Algeria.
The guys from mobile phone history - Nokia and Blackberry, had also devices with their brands at the show. Blackberry continues with its old style, i.e. black, thick, and slow phones with physical keyboard. Nokia was even more retro and brought back the banana phone. All those people who say the mobile phone is only for talking and texting like them. Except, such a phone is useless nowadays, and not even those real retro people really want to use them.
MWC is a good industry event, many interesting new things, if you want to find them, and Barcelona is a great city. There is always something to improve, and some companies should also do their homework better that they don’t look so out of place. In that way we can create the next generation MWC. But really, please, don’t call it ‘next generation’, because there are already hundreds of companies at MWC that offer next generation products.
Est. 2009 Grow VC Group is the global leader of fintech innovations, digital and distributed finance services. Our mission is to make the finance services more effective, transparent and democratic. The Group includes leading fintech companies in their own areas.
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