Author: ashton

Chinese deepfake app goes viral, raising privacy concerns

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Zao, a Chinese app that allows users to swap their faces with celebrities in video clips, has gone viral within days of launching on August 30. However, the app quickly gained notoriety amid concerns over user privacy.

The app, which is only available in China, allows users to superimpose images of their face onto video clips of celebrities such as Leonardo DiCaprio and Marilyn Monroe. At the time of writing, it is the most-downloaded free app on China’s iOS App Store, according to App Annie.

The backlash against Zao demonstrates that people are increasingly aware of the privacy issues surrounding their facial imagery data

However, as the app’s popularity surged, users quickly became aware of a clause in Zao’s privacy policy that stated that the company had “completely free, irrevocable, perpetual, transferrable and re-licensable rights” to the content they created on the platform. This prompted an online backlash.

Zao has since changed its terms and conditions to say that user-generated content will only be used to improve the app and that all deleted content will be removed from its servers. But this hasn’t been enough to end the controversy. Messaging app WeChat proceeded to restrict access to Zao on its platform, citing “security risks”.

China has been investing heavily in facial recognition technology as part of its mass surveillance system. In Hong Kong, protestors wear masks and helmets to conceal their identity, concerned that China’s facial recognition technology could be used to arrest them. The backlash against Zao demonstrates that people are increasingly aware of the privacy issues surrounding their facial imagery data.

The new app also illustrates just how rapidly deepfakes have developed. Unlike earlier deepfake technology, which required hundreds of photos to simulate someone’s appearance, Zao can recreate a person’s likeness in just eight seconds, using only one photo. This is a worrying development, as deepfakes have a wide range of unethical applications, from blackmail to undermining governments by wreaking political havoc.

What a sovereign internet could mean for free speech

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In June 1989, on a visit to London, US President Ronald Reagan condemned the Tiananmen Square massacre. Reagan offered a vision of hope. He celebrated the unstoppable march of democracy, claiming it would be fuelled by a revolution in communications technology. “You cannot massacre an idea,” he told his 1,000-strong audience. “The Goliath of totalitarianism will be brought down by the David of the microchip.”

Yet massacring an idea is exactly what China set out to do. Starting with the communications technology that Reagan had praised, China began to wipe away all evidence of the events in Tiananmen Square. To this day, Chinese search results for Tiananmen Square yield no mention of the massacre. Even coded messages, such as a hand of playing cards showing the year, month and date of the massacre (89/6/4) will not slip past the censor.

In its early days, techno-optimistic commentators saw the internet as a bastion for liberal democracy, exposing people all over the world to new ideas, democratising nations and gradually eroding authoritarian regimes. Few predicted the force for censorship the internet could become. Today, however, the Chinese model of the internet – protected by the Great Firewall – has been hugely effective and that model is now growing in popularity around the world.

Remodelling the Web
When it first emerged as a borderless, transnational entity, the internet seemed liberal by its very nature. It was as though the democratic principles of freedom, openness and individualism were hardwired into it. But China had a rather different vision for the internet.

Techno-optimistic commentators saw the internet as a bastion for liberal democracy, exposing people all over the world to new ideas

In 1997, Beijing enacted its first laws criminalising online content deemed harmful to national security or the interests of the state. Soon after, it began working on the Golden Shield Project, which provided the foundations for China’s Great Firewall. At the time, figures like Bill Clinton mocked China’s efforts to manage the flow of information within its borders (attempting to control the internet, he said, was like “trying to nail Jell-O to the wall”). But China has succeeded in building a virtual world that mirrors the lives of its citizens, through which the state determines what information its subjects can access.

James Griffiths, author of The Great Firewall of China, has set out to understand how China built the world’s most sophisticated system for surveillance and online censorship. “As information passes into and out of the country, the Great Firewall inspects it and blocks anything undesirable,” Griffiths told The New Economy. “It can also block tools to avoid censorship, such as virtual private networks. At a local level, Beijing relies on domestic tech firms to censor and survey users themselves. They are obliged legally to hand over data to the authorities when asked and are expected to follow unwritten rules and avoid invisible red lines on what to censor, which means most err on the side of over-censorship lest they face punishment.”

Now Russia is following suit. This year, Putin passed two bills to cut off the Russian internet from the rest of the world. Until recently, disconnecting from the global internet was thought to be impossible. After all, China created its own independent infrastructure from the start of the internet boom. Russia, by comparison, had baggage.

“A few years ago, most people would have said Russia’s internet was too entangled with the rest of the world’s and its citizens too used to online freedoms to head fully in the direction of China’s internet, but now that seems a lot less certain,” said Griffiths. “Recent moves by the Kremlin have severely tightened internet regulation and Russian officials are clearly basing their tactics on China’s.”

Russia has spent the past few years enacting laws that force international companies to store Russian data within the country’s borders. Now, the Kremlin is trying to produce a Russia-only copy of the internet’s DNS servers. A DNS server is the database that tells the internet how to translate hostnames into IP addresses. With a Russia-only DNS server, online users would be redirected from foreign sites, meaning they’d have no access to external information. If Russia succeeds in disentangling itself from the global internet, it will prove that the internet can be remoulded into an alternative model that values sovereignty over openness.

A tool for control
Under Chinese President Xi Jinping, cyber sovereignty has become a key part of China’s foreign policy. Through the Belt and Road Initiative, China is supplying many countries not just with roads and railways, but also advanced infrastructure such as broadband networks and data centres. In February, Chinese tech giant Huawei opened its first cloud data centre in Egypt. Meanwhile, in Morocco, China is helping to build the much-anticipated smart city Tangier Tech, which will host 200 Chinese companies.

Alone, these infrastructure projects do not prove that China seeks to influence cyber policy within these countries. However, China is also exporting a global vision for how the internet should operate in all nations. Every year, at the World Internet Conference in Wuzhen, Xi Jinping makes the case for cyber sovereignty, arguing that every country should have the right to choose how they govern their internet.

The Chinese-sponsored initiative seems to be working. According to the Freedom of the Net 2018 Report by Freedom House, 26 out of 65 countries have seen a decline in internet freedom since June 2017. “More repressive governments are trying to use [the internet] for their own goals, which can often be to suppress dissent, silence journalists, silence civil society and better control their citizens,” said Allie Funk, a senior analyst at Freedom House and co-author of the report.

China is the key driving force behind this trend for digital authoritarianism. North African countries are increasingly implementing Chinese-style cyber policies. Nigeria recently enacted measures that require consumer data to be hosted within its borders and last year Egypt passed a law allowing it to ban social media accounts with more than 5,000 followers if these accounts publish ‘fake news’ or criticise the government.

The guise of security
The allure of a sovereign internet, particularly for poorer countries, is not so hard to understand. The revelations made by Edward Snowden, cyberattacks like WannaCry and the spread of misinformation have all eroded trust in an open internet. However, as Dr Tim Stevens, Lecturer in Global Security at King’s College London, pointed out, grouping fundamentally distinct issues like these is exactly what makes cyber sovereignty a problematic concept.

“You have two sets of problems,” said Stevens. “One is basically a hacking issue. The other one is a political issue. And I would resist the inclusion of one within the other. I wouldn’t count political issues around free speech, for example, as a computer security issue. But we’ve been told that internet sovereignty is the answer to this nonetheless… It’s not cyber attacks that are a problem from the Chinese perspective, it’s the spread of undesirable political ideas within its borders. That’s what’s motivated cyber sovereignty – nothing else.”

It is increasingly common for governments to move towards digital authoritarianism under the guise of a public concern such as national security. For example, the Kremlin claims that an independent Russian internet would better defend the nation against cybersecurity threats. But, in reality, Russia seeks to control the information its citizens can access.

Russian senator Yelena Mizulina defended the new internet laws at an internet safety forum in April, saying: “What are rights? They’re the biggest lack of freedom. I can tell you that the more rights you have, the less free we are. A ban is when the person is free because it says ‘this is impossible, but with everything else – [you can] do what you want’.” Many critics leapt on her backwards reasoning as eerily reminiscent of the slogan used in George Orwell’s Nineteen Eighty-Four: “War is peace. Freedom is slavery. Ignorance is strength.”

It is increasingly common for governments to move towards digital authoritarianism under the guise of a public concern such as national security

Another public concern harnessed to convince governments of the benefits of a sovereign internet is fake news. In the last two years, Russia, Kenya and Singapore have all passed laws banning fake news. Such laws were criticised as attempts to muzzle the media. Funk argues that deploying censorship laws under the pretext of regulating fake news is becoming increasingly common: “Governments are taking a very serious issue and a genuine problem that we need constructive solutions to and manipulating it into a tool for censorship.”

A divided cyberspace
Cyber sovereignty isn’t just the preserve of countries with weaker democracies. All around the world, governments are establishing stricter digital borders. Australia, Canada, New Zealand, the UK and the US have all called on organisations to create “access solutions” that would open security backdoors to company data.

Data localisation is also becoming more prevalent. India wants foreign technology and payment firms to store their data locally, while France’s defence minister wants French intelligence agencies to use local alternatives to Palantir, the American data analytics company.

As nations move to protect their data, some argue that the disintegration of the World Wide Web is inevitable. In Rise of a Cybered Westphalian Age, authors Chris Demchak and Peter Dombrowksi posit that nations will increasingly seek to establish cyber territories. “No frontier lasts forever,” the authors claim. “No freely occupied global commons extends endlessly where human societies are involved.”

However, Stevens warns that the idea of an inevitable move towards cyber sovereignty may not be so straightforward. “This is a process not driven by any of the structural factors in the world system,” he said. “This is driven by politics, and where there is politics, other visions are possible.”

Furthermore, Stevens believes the international community must do more to engage in the debate around the role of the internet. “I think the interesting thing about cyber sovereignty is that it’s a very live diplomatic discussion,” said Stevens. “It’s Russia and China’s bid to lead the debate on this, on cybersecurity and around norms of state behaviour in this environment. It’s going to be really interesting to see what happens and how much traction China can get. You see, the Chinese model can often get dismissed in this debate because it’s not what we like. And I think that’s foolish. I think that’s absolutely counterproductive. We need to engage with it.”

Western governments have traditionally overlooked the idea that the internet could be a tool for totalitarianism. This complacency has fuelled the rise of digital authoritarianism. Perhaps liberal thinkers underestimated the force for hate speech and disinformation that the internet would become. Perhaps optimism allowed them to imagine that the internet would function as a self-regulating ecosystem. Whatever the cause, failing to recognise that the internet can be censored and controlled has contributed to a worldwide decline in internet freedom. The international community must accept the rising popularity of an alternative internet, before this basic human right is further undermined.

Amazon lets users disable human review of Alexa recordings

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Amazon has changed the settings on its Alexa app to allow users to stop their voice recordings being reviewed by the company’s employees. The policy change, which was announced on August 2, comes amid growing concerns surrounding the privacy risks posed by AI voice assistants.

Alexa records every exchange users have with Echo speakers and other devices so that Amazon can assess the assistant’s success in fulfilling user commands

Alexa records every exchange users have with Echo speakers and other devices so that Amazon can assess the assistant’s success in fulfilling user commands and improve its performance.

Previously, Amazon did not inform users that their audio recordings might be listened to by its human workers. Then, in April, a report by Bloomberg confirmed that Alexa’s services can only improve thanks to human review by thousands of its employees.

This process – known as data annotation – is a core part of machine learning. It ensures that data collected by the device can be correctly labelled and fed back into the system. This helps Alexa improve its understanding of slang and regional dialects.

According to Amazon, “only an extremely small fraction of voice recordings are manually reviewed”. However, since such reports have emerged, privacy advocates have called on tech companies to increase transparency around – or even halt – the practice.

A number of high-profile incidents have increased concerns. In July, one of the contractors hired by Google to review voice recordings leaked more than 1,000 Google Assistant recordings to the Belgian media.

Tech companies are starting to give in to pressure from regulators. Google has paused human review of audio recordings in the EU while it liaises with privacy regulators and Apple has paused the process altogether.

Amazon, meanwhile, is simply creating a clearer opt-out system. In a similar vein, the company also introduced an “Alexa, delete what I say today” voice command in May. Amazon’s latest move is a sign that tech companies are taking steps to improve transparency and give users more control over their data.

Start-up raises $3.5m to provide medical insurance to digital nomads

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Norwegian start-up SafetyWing, which offers medical insurance to digital nomads, has raised $3.5m in a round of seed funding, according to a report published by TechCrunch on August 1.

In recent years, a growing number of young people have taken up digital nomadism. Freelancers and tech workers, who need little more than an internet connection to do their work, are leaving the office behind to travel the globe. Living abroad, these digital nomads can enjoy all the benefits of a new environment, a self-governed lifestyle and cheaper living costs.

Since mandatory healthcare coverage is only available in one’s home country, many digital nomads are left without basic health insurance

However, one thing they forfeit is a social safety net. Since mandatory healthcare coverage is only available in one’s home country, many digital nomads are left without basic health insurance.

SafetyWing’s founders, Sondre Rasch, Sarah Sandnes and Hans Kjellby, saw a gap in the market. Digital nomads themselves, they have travelled from their home country of Norway to Silicon Valley. The SafetyWing platform, they argue, is the first internet-based welfare state.

Venture capital firm byFounders, which focuses on the Nordic and Baltic regions, led the recent round of seed funding. CreditEase Fintech Investment Fund and DG Incubation also participated.

In previous funding rounds, SafetyWing received investment from the seed accelerator Y Combinator, as well as around $500,000 from investors such as NordicVest Angels and the Norwegian Investment Authority.

As many as 25 million people are estimated to make up the company’s target market. SafetyWing’s insurance is sold as a 28-day rolling subscription to suit the flexible lifestyles of these wandering workers. It covers hospital visits and prescriptions, but not pre-existing conditions like cancer.

Coverage starts at $37 every four weeks, although there is a $30 add-on fee for digital nomads in the US. As the founders point out, this is also a low-cost way for international workers in the US – who aren’t covered by the Affordable Care Act – to access basic care.

Saudi Arabia to test robo-advisory services

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Saudi Arabia’s capital market regulator gave approval on July 30 for two companies to test the use of computer-generated advice for investors. The two firms, Wahed Capital and Haseed Investing, will test automated platforms that provide their clients with advice on securities and investment schemes. The companies will also offer automated online discretionary investment management.

Approval of these tests comes amid Saudi Arabia’s drive to encourage the use of financial technology. Last year, the country partnered with the UAE to begin developing fintech for cross-border settlements.

In addition to providing tailored investment advice in a cost-effective and scalable way, robo-advisors could improve financial inclusion

Globally, it is estimated that between $2.2trn and $3.7trn in assets will be managed by robo-advisory services by 2020. Throughout the Middle East, many countries are preparing to capitalise on this trend.

The Central Bank of Bahrain has issued a set of directives for the regulation of robo-advisors. Earlier in July, Abu Dhabi launched a new governance and regulatory regime for computer-generated investment advice.

There are a number of benefits to these computerised investment services. In addition to providing tailored investment advice in a cost-effective and scalable way, robo-advisors could improve financial inclusion.

Historically, wealth management and investment services have only catered to those with sizeable assets. Robo-advisors, however, are typically designed for digital-first investors looking to keep costs low. Therefore, it’s hoped that they could make financial advice and asset management more accessible to the wider population.

These services are still in the early stages of development and some firms have struggled to unlock their potential. Additionally, customer acquisition can be a challenge without wider trust in the technology.

Investec is closing its robo-advisory service due to a lack of investor appetite, after reporting losses of £32m (€35m) over the course of two years. Moving forward, regulators will need to guarantee the objectivity and transparency of these services before the technology is successfully rolled out.

China’s Evergrande to bring electric car charging closer to home

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Evergrande wants to make it easier for electric car owners to charge their vehicles closer to home. The Chinese property developer announced on July 28 that it had established a joint venture with the State Grid Corporation of China to develop next-generation car-charging technology.

Owners of electric vehicles in China pay around three times more to use public-charging stations than they would if the technology were available at home. This is because public utility poles come with a high service fee.

Evergrande plans to integrate vehicle-to-grid technology into its electric cars, allowing users to charge their vehicles in residential car parks overnight

Moreover, charging points are relatively difficult to come by in China. There are only 2.3 chargers per vehicle, with many of them stationed outside residential areas.

Evergrande plans to integrate vehicle-to-grid technology into its electric cars, allowing users to charge their vehicles in residential car parks overnight, when electricity rates are cheaper. Users would then be able to sell electricity back to the grid.

The Chinese Government is driving a huge boom in its electric car market. It’s expected that electric vehicle sales could reach 1.6 million this year, according to the China Association of Automobile Manufacturers.

Valued at more than $100bn, Evergrande is thought to be one of the biggest real estate companies in the world. Recently, it’s been aggressively expanding into the automotive space. In June, the company announced a $23bn investment to build new production facilities capable of manufacturing one million electric cars a year.

However, there is some scepticism in the electric vehicle sector as to whether the company can meet its ambitious targets. In 2017, Evergrande Health agreed it would buy a 45 percent stake in Chinese electric vehicle firm Faraday Future, but reduced the amount to 32 percent Faraday CEO Jia Yueting was blacklisted by the government.

The company also fell behind on battery-powered car production this year because of technology issues. Although other electric car companies are facing similar hurdles, Evergrande’s acquisition-based approach may make it harder for the company to grow due to the challenges of business and technology integration.

Uber Freight launches in Germany

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Uber is launching an on-demand freight platform in Germany, the company announced on July 24. This will be Uber Freight’s second launch in Europe after the platform went live in the Netherlands earlier this year.

Uber Freight is already an established trucking service in the US, where it connects 48 states and generates over $125m in quarterly revenues. If its execution in Germany is successful, the company plans to expand across Europe.

Uber Freight is already an established trucking service in the US, where it connects 48 states and generates over $125m in quarterly revenues

The trucking market in Europe is worth approximately $500bn. It is a sector ripe for innovation on account of its many logistical bottlenecks. On average, trucks are empty for 21 percent of the distance they travel and even after delivery trucking firms can spend weeks chasing invoices.

Working alongside the enterprise cloud company SAP, Uber has developed a logistics solution that includes real-time tracking of consignments and seamless data sharing between shippers, freight forwarders and carriers. Meanwhile, carriers can select loads that suit their needs and fit their schedules.

However, Uber is far from the sole player in this market. Germany’s trucking sector is already home to digital-first start-ups such as Flexport, which raised $1bn in funding this year and has garnered support from investors like the Softbank Group. Uber will be trying to gain a competitive edge over these successful local players.

In the past, Uber’s operations in Germany have caused controversy. When it initially tried to launch its ride-hailing services in the country, it ran into disputes with taxi companies and lawmakers.

Uber CEO Dara Khosrowshahi has been careful to involve German officials ahead of the new platform’s implementation in the hope that this will ease Uber Freight’s launch in the country.

A sustainable reimagining of the global construction industry

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The 20th century marked the age of the concrete jungle. Reinforced concrete, on account of its strength, durability and low cost, brought about nothing short of a revolution in architecture, enabling the construction of taller structures than ever and populating our skylines with high-rises and skyscrapers. But concrete’s popularity may be waning.

The built environment currently accounts for 39 percent of global CO2 emissions. This makes the construction industry one of the least environmentally friendly in the world. Extracting raw materials, such as virgin cement, is cheap and therefore very common within the sector, but it comes with a significant environmental cost. According to a report by Chatham House, cement alone creates about eight percent of global CO2 emissions. As part of global efforts to avert a climate crisis, our cities need to evolve away from their reliance on concrete.

Major players within the construction sector are becoming increasingly aware of just how unsustainable the industry’s practices are. Property firm Grosvenor and architects Foster and Partners, for example, have committed to making its buildings zero carbon by 2030. However, the pace of change is still slow. In its 2018 Global Status Report, the UN stated that not enough is being done globally to drive major change towards sustainable construction.

The built environment currently accounts for 39 percent of global CO2 emissions. This makes the construction industry one of the least environmentally friendly in the world

In this environment where major firms too often continue to conduct business as usual, the smaller players within construction are emerging as real innovators. Inspired to lower construction’s carbon footprint, a number of researchers and architectural studios are offering a vision of the new age of eco-friendly architecture

In pursuit of innovation
Soon the skyscrapers of Toronto will welcome an unusual new neighbour. Tree Tower, standing 62 metres high, is a reimagining of the high-rise for a greener future. First proposed in 2017, Tree Tower is named so because it will be constructed from cross-laminated timber and bamboo, while its long, staggered terraces almost resemble the branches of a tree.

For Chris Precht, the visionary behind Tree Tower and founder of architectural studio Precht, lowering the carbon footprint of buildings is as essential as creating beautiful architecture. “The ‘international style’ of [the] concrete structure and glass facade uniformed our cities and killed [a] thousand years of building intelligence and local building culture,” Precht told The New Economy. “We try to create buildings that give back space to nature on the facades and roofs, and create a link between people and plants. I think the time of ‘bigger, higher, larger’ in architecture is over and we [are entering] an era of vitality and health.”

Precht hopes his green architecture will encourage city dwellers to pursue a more sustainable lifestyle. He lives with his wife in the Austrian mountains, where they grow their own food and try to live as self-sufficiently as possible. Aware that this is not an option for many people living in urban spaces, they believe it’s important to incorporate gardens into their high-rise designs.

Precht is also among a new wave of architects championing cross-laminated timber, which many believe to be this century’s solution to cement. Cross-laminated timber consists of multiple layers of timber glued together at right angles. This gives it a high strength-to-weight ratio and a much lower carbon footprint than cement or steel. In addition to using eco-friendly materials, Precht’s buildings tend to be modular and prefabricated. The building’s units, each a standardised size, are assembled offsite, then delivered and stacked on top of one another, in a rapid construction technique that minimises waste.

Far from a limitation, Precht regards the challenge of sustainability as a force for innovation in an industry that has so far been slow to change. “The question is if this change comes from us architects or from outside of our industry,” said Precht. “For the mobility sector, [for] example, it needed outside companies like Uber, Hyperloop or Tesla to bring a change.”

With this in mind, Precht has a warning for architects. “We need to be aware that if buildings are so replicable and detached from a place and climate, then in a couple of years they will be designed by artificial intelligence and not by architects,” he said. “Then, I fear, the architects of the future [will] not [be] called Rem [Koolhaas] or Bjarke [Ingels], but Google, Alibaba or Tencent. Rather than focusing on profitability and efficiency, we need to put human factors [at] the forefront.”

Fostering collaboration
Green architecture has given rise to a wave of innovative designs. Some engineers are reusing rainwater for toilet flushing and irrigation, while others are finding ways to use biodegradable materials wherever possible in place of toxic ones such as lead or mercury. One such ingenious method currently being developed by research and development company Biohm is to use mycelia, which is sourced from fungi, to create sheets and blocks for insulation.

There are also ongoing projects to harness the world’s waste for reuse in construction. Researchers at RMIT University have created bricks made of cigarette butts to lower production costs and CO2 emissions. Meanwhile, researchers at the University of Bath are experimenting with recycled duvets as insulation.

Evidently, technical know-how is not the main obstacle to creating a zero-carbon building. The greater challenge lies in making sustainability the industry norm. Construction projects tend to have a rapid turnaround, with almost no time allocated for research and development, while incentives to construct as cheaply as possible are high. As a result, the rate of change in the industry is slow.

For buildings like Precht’s Tree Tower to become commonplace, a huge amount of collaboration and governmental support is needed across the construction industry. For example, Canada is one of the countries currently at the forefront of building cross-laminated timber high-rises. While this is partly because Canada has an abundance of natural resources, it’s also a testament to the country’s reward schemes for buildings that exceed carbon footprint standards.

In a bid to foster such collaboration in the industry, the World Green Building Council (WorldGBC) brings together businesses and non-profit organisations with the aim of increasing the number of green buildings worldwide. It currently has 70 such councils around the globe.

“The building industry is a particularly fragmented sector,” said Dominika Czerwinska, Director of Membership and Regional Networks at the WorldGBC. “One of the key challenges is effectively translating the value of a sustainable investment to each of the stakeholders involved, based on where the value lies for them.”

According to Czerwinska’s colleague, James Drinkwater, Director of Europe Regional Network at the WorldGBC, meaningful change will only occur when every player across the value chain enjoys the benefits of sustainability. Drinkwater argues that demonstrating this value is not as difficult as one might think. “Significant carbon cuts on infrastructure projects are closely connected to resource efficiency, so it is possible to deliver win-wins for climate and cost control,” he said.

Driving change within the construction industry is a colossal feat, requiring not just innovation but also genuine collaboration on a global scale. This challenge comes at a time when urban expansion is happening at a faster rate than ever before. Regions like South-East Asia and sub-Saharan Africa are currently experiencing rapid urbanisation and are therefore projected to use huge quantities of cement and concrete in the years to come.

To revolutionise current practices, the public and private sectors need to work together closely. Perhaps what the industry needs most of all is a fundamental shift in mindset, moving away from minimising production costs at any expense and towards considering the long-term costs of all design decisions.

Equifax reaches landmark $700m settlement in data breach case

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Credit reporting company Equifax will pay $700m to settle US investigations into a data breach it suffered in 2017, it was announced on July 22. Despite being the largest settlement of its kind, consumer advocates argue that it is insufficient to repay the millions of Americans whose data was exposed.

Equifax is one of the ‘big three’ credit reporting agencies alongside Experian and Trans Union. In the summer of 2017, approximately 147 million Equifax customers were affected by the breach, which saw people’s Social Security numbers, driving licence data and addresses compromised.

While there is little evidence that the breach led directly to fraud, the families affected have spent time and money trying to protect their data

Hackers gained access to the information through a security flaw in a web application framework. Equifax later admitted that it had known about the vulnerability two months prior to the breach, but did nothing to fix it.

“Equifax put profits over privacy and greed over people, and must be held accountable to the millions of people they put at risk,” said New York Attorney General Letitia James.

The Federal Trade Commission concluded that Equifax had failed to protect people’s information, ruling that at least $300m of the agreed sum would be paid as compensation to those whose data was exposed. While there is little evidence that the breach led directly to fraud, the families affected have spent time and money trying to protect their data in the aftermath of the breach.

Some feel that the settlement does not go far enough. Democratic US Senator Sherrod Brown said it was “just a drop in the bucket” of what Equifax’s failure could cost US families. Moreover, given the sheer scale of the breach – which was one of the largest in US history – it could be argued that the settlement is inadequate as a deterrent against companies neglecting to safeguard consumer data.

Although a landmark settlement, for Equifax, which is valued at $16.7bn, this is little more than a slap on the wrist for the credit-reporting giant.

Top 5 reasons to study in São Paulo

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For those looking to obtain a business qualification, overseas study presents an exciting opportunity. In addition to their academic enrichment, international business students have the chance to learn about a new culture and work alongside people from all over the world.

Today, Brazil is the fifth-largest higher education market in the world. This, combined with its vibrant culture and status as a fast-growing economy, makes it an attractive place for the next generation of business leaders and entrepreneurs.

Studying in São Paulo primes international students for exciting careers in an international landscape

In particular, Brazil’s largest city, São Paulo, offers a student experience like no other. The huge metropolis is known for its thriving business centre and for being a melting pot of different cultures, including Japanese, Italian and Portuguese. We list the top five reasons why São Paulo is an excellent choice for those looking to study abroad.

Business is booming
Brazil’s economy has seen tremendous growth in recent years, making it an exciting place for those with an interest in business to study. São Paulo contributes to 18 percent of Brazil’s GDP and is widely considered to be the financial capital of the country. As well as allowing students to develop their knowledge of the Portuguese language, studying in São Paulo primes international students for exciting careers in an international landscape.

On the one hand, by gaining a greater understanding of Latin American culture, students can find themselves well placed for careers in one of São Paulo’s booming industries, such as banking, finance or telecommunications. Alternatively, students can use their education in São Paulo to kick-start a global career, having gained experience in a multicultural environment working with people from around the world.

Hotbed of culture
Paulistanos, as São Paulo’s residents are known, have a wealth of cultural activities at their fingertips. The city has more than 100 museums and 300 cinemas, as well as an international film festival that takes place each year. Among the city’s most famous museums is the Pinacoteca, the oldest museum in São Paulo, which has around 9,000 artworks. It is situated in the centre of the old city and surrounded by the Jardim da Luz garden.

Another is the Museum of Art of São Paulo, which displays famous artworks by Pablo Picasso and Vincent van Gogh, among others. The building is easily recognisable for its iconic design, courtesy of modernist architect Lina Bo Bardi. Outside the museum walls, the city also has a thriving street art scene, with the Beco de Batman (Batman’s Alley) displaying the city’s highest concentration of street art murals.

A global city
Modern São Paulo has been shaped by immigration. The city experienced a number of migration waves from the mid-19th century to the start of the 21st, with populations relocating from across Europe and Asia. Today, São Paulo has one of the most ethnically diverse populations in Brazil and is known for its cosmopolitanism. It has the largest Japanese population outside of Japan, which is mostly concentrated in the Liberdade neighbourhood, as well as a strong Italian heritage, particularly in the neighbourhoods of Bixiga, Brás and Mooca.

São Paulo continues to champion immigration today and is at the forefront of a Brazilian initiative to welcome refugees, helping these individuals learn Portuguese and find work in the city. Studying in São Paolo is therefore a highly multicultural experience, where students will experience a wealth of cultures beyond just that of Brazil.

Eat well
It’s perhaps inevitable that such an ethnically diverse city would give rise to a rich street food culture. Street markets have continued to thrive even as supermarkets spread across Brazil. The Municipal Market, a historic building stretching more than 12,000 metres, is a popular food market selling a wide range of fresh fruits, vegetables, fish and spices.

Cheese-filled pastries, churrasco (Brazilian barbecue) and the city’s famous mortadella sandwich are among the local delights that can be found at one of these markets, but visitors are just as likely to come across Asian street food like imagawayaki, a sweet treat from Japan. São Paulo is home to an array of excellent restaurants, including DOM, currently the only restaurant in Brazil with two Michelin stars, as well as thousands of pizzerias and high-quality sushi restaurants, thanks to its diverse population.

Work hard, play hard
It should come as no surprise that São Paulo has the non-stop energy that is characteristic of a sprawling metropolis. The sheer size of the city can be daunting initially, but this is also a key aspect of the city’s appeal. Many Paulistanos work in high-flying roles within the city’s main industries, and so studying in São Paolo means being right in the heart of Brazil’s fast-growing economy.

In recent years, the influx of people and rising wealth has led to an increasingly vibrant nightlife scene. Every evening a vast number of bars and nightclubs open their doors, many of which remain open late into the night.

The city is a venue for a number of high-profile music festivals. This year’s Lollapalooza, which took place in April, boasted a lineup featuring the Arctic Monkeys, Lenny Kravitz and more. For a more traditional music experience, visitors can take a trip to the Municipal Theatre, which is home to a range of shows, from ballet to opera, while those looking for a hands-on experience can visit a local samba school and learn Brazil’s signature dance.

As a city that welcomes all visitors, São Paolo is an enthusiastic host of one of the world’s biggest Pride parades, which also featured in popular Netflix show Sense8.

For those drawn to urban jungles, there is no better place to study abroad, developing the skills needed for a successful career in business.

The social solution to automation

Posted on by ashton

Nowadays, one struggles to think of any jobs that will still be available for our children when they grow up. Panicked parents are increasingly trying to anticipate the next big digital thing so they can give their kids a leg-up over all the other humans whose jobs will soon be automated. Accountants and radiographers are already doomed, but surely the developers perfecting driverless cars or adding new features to Facebook are safe, right?

Instead of thinking this way, we should view the emergence of fabulously efficient digital technologies as an opportunity to create new kinds of jobs that satisfy our social natures. This approach would not only solve the problem of the ‘end of work’; it would also address one of modernity’s greatest ills: loneliness.

Nothing about the Digital Revolution requires us to stop valuing humans and human interactions

Socially isolated people are sadder and sicker than those who enjoy meaningful human connections, and their numbers are growing. According to a 2016 commentary in The New York Times: “Since the 1980s, the percentage of American adults who say they’re lonely has doubled from 20 percent to 40 percent.”

All by myself
A social-digital economy would respond simultaneously to the problems posed by automation and loneliness. Machines and algorithms already rule the digital economy, and humans must accept that they have no chance of competing with them in terms of efficiency and computing power. We should expect – and welcome – a future in which machines fly our passenger jets and perform our heart surgeries. Why put up with clumsy, distractible human pilots or surgeons if we don’t have to?

To be sure, some human workers will be required to manage things in the digital economy, but not nearly at the levels of the past. Meanwhile, all of the humans who would have become pilots, surgeons or accountants in earlier times can instead perform the jobs at which machines are inherently bad.

As Sherry Turkle of MIT notes, for some activities, the involvement of a machine spoils the experience. Consider social media: Facebook and Twitter cannot reduce loneliness because they are designed to serve up a biased sample of social experience. Like digital sugar, they can make a social interaction instantly gratifying, but they always leave an empty feeling behind. By offering merely a simulation of social experience, they ultimately make us lonelier.

In the past, the label of ‘social worker’ applied to a narrow cohort of professionals who cared for those who could not care for themselves. But in a social-digital economy, the meaning of the term would be expansive. After all, the barista who makes your latte also provides a social service merely by asking how your day is going. That simple question, even if motivated by compliance with workplace rules, would have no meaning coming from a machine.

A social species
Our need for social interaction is a product of our evolution. Humans, the social neuroscientist John Cacioppo explained in his book Loneliness, are “obligatorily gregarious”. A zookeeper tasked with creating a “proper enclosure for the species Homo sapiens”, he wrote, would “not house a member of the human family in isolation” for the same reason they would not “house a member of Aptenodytes forsteri [emperor penguins] in hot desert sand”. Put another way, if one wanted to torture an obligatorily social animal, the most cost-effective way would be to isolate it.

Throughout the industrial and post-industrial eras, our social nature has been suppressed by a cultural addiction to efficiency, but the Digital Revolution could help us rediscover what we have lost. Nowadays, the sole application of digital technologies in the workplace is to boost productivity, but with a socially minded approach, we would instead focus on giving human workers freer rein to express themselves. In a social economy, we would still care about efficiency, but we would make allowances for human fallibility. Just as we don’t expect perfect efficiency from our lovers, we should not expect it from human teachers, nurses or baristas.

In addition to efficiency, we should also be thinking about how we can socially enhance various professions, including those that don’t seem especially social. Consider astronauts: a focus on efficiency would require us to phase out human space explorers more or less immediately. Machines are already better at making course corrections and gathering data, and they don’t require the extra facilities that humans need to stay sated and sane in space.

But there is another way of thinking about space exploration – one in which the presence of humans is the entire point. Storytelling has always been a deeply enjoyable social experience for humans, and though robot rovers can stream data from atop Mars’ Olympus Mons, they will never be able to tell an emotionally satisfying story about what it’s like to climb it. Why explore space at all if not to contribute to the story of humankind? From a social perspective, replacing human astronauts with machines is a bit like replacing Meryl Streep with a CGI animation.

For anxious parents, the best way to predict the future of work is not to study the latest technologies, but rather our own past. Before Homo sapiens became farmers, we belonged to forager communities that satisfied many of the social needs that go unmet today. The future of work in the social economy will be about attending to those needs once again.

For that to happen, though, we need to change policymakers’ and businesses’ mindsets. As matters stand, the workers who deal most directly with other humans are often the first to be displaced by automated services. But this is a choice, not an economic necessity. Nothing about the Digital Revolution requires us to stop valuing humans and human interactions.

Rather than channelling the automation dividend into the pockets of a few billionaires, we should start using it to restore meaningful connections between obligatorily gregarious beings. Succeeding at that would be a human story worth telling.

©️ Project Syndicate 2019

The disruptive impact of fintech

Posted on by ashton

As its Valentine’s Day present to the world, the Financial Stability Board (FSB) in Basel published a report titled Fintech and Market Structure in Financial Services. The report’s subtitle was more insightful, and revealed the authors’ intention to interrogate “market developments and potential financial stability implications”.

The report’s premise is straightforward: the arrival of established technology giants, or Big Tech, on the financial scene could “affect the degree of concentration and contestability in financial services, with both potential benefits and risks for financial stability”.

Maybe the time to assess the financial stability risks of open banking was in the consultation period before the directive was passed

The focus is on companies like Apple, Google, Facebook, Amazon and Ant Financial, rather than the myriad fintech start-ups in Silicon Valley, Israel or clustered round the Old Street roundabout in London. Central banks and finance ministries are beginning to ask whether the activities of the tech behemoths, whose market capitalisations now dwarf those of even the biggest banks, will be wholly benign.

Bowing to Big Tech
In a way, it might be thought surprising that the questions are being raised only now. Phrases like ‘bolting stable doors’ come to mind. In Europe, regulatory changes like the Second Payment Services Directive (PSD2) have been crucial in opening up the banking system, and regulators like the UK’s Financial Conduct Authority have for some time been running regulatory sandboxes to smooth the way for new entrants by helping them to structure themselves to comply with standards.

PSD2, often described as ‘open banking’, requires banks to offer their customer data to non-bank providers of payment and account information services. Aggregators can then present the customer with an integrated view of their finances and offer add-on services.

Maybe the time to assess the financial stability risks of open banking was in the consultation period before the directive was passed. Even now, the list of contributors to the FSB’s work shows that the European Commission and the key regulators in Europe and North America were not involved. So what did the FSB conclude?

The authors begin, tactfully, with a series of bows to Big Tech. They say, correctly, that “the greater efficiency of new players may enhance the efficiency of financial services in the longer term”. Certainly, the absence of the cost drag of legacy IT systems and underused branch networks (which have been seen as a kind of public service and are therefore hard to rationalise) allow for cheaper digital delivery mechanisms, which banks can only envy.

It is also entirely fair to argue, as the authors do, that increased competition in the supply of financial services may benefit consumers by expanding choice, stimulating innovation and driving down transaction costs. The pressure on traditional providers is generating strong incentives to reduce costs and improve service.

Incumbents can no longer afford to sit back and allow inertia to be their friend, as they did in the past when account switching was rare. But the FSB also warns that cross-subsidisation may allow Big Tech firms to gain market share rapidly and knock out existing providers. As a result, “their participation may not result in a more competitive market over the longer term”.

Remain vigilant
That is a warning policymakers should heed. But the FSB is supposed to be primarily interested in stability, and here the report points in both directions at once. On one hand, the authors argue that greater competition can create a more resilient financial system, with a wider range of companies managing the essential plumbing. On the other hand, the ability of new entrants to undercut banks significantly could make the latter “potentially more vulnerable to losses”. The accompanying reduction in “retained earnings as a source of internal capital”, the report argues, “could have an impact on financial sector resilience and risk-taking”.

The reader is largely left to decide which of these two scenarios is most likely to play out. But while the report is unambiguously positive about the impact of fintech start-ups, whether they remain standalone entities or join existing banks to create complementary offerings, the authors’ conclusions about Big Tech are far more nuanced. Whereas previous analyses have suggested that the financial stability implications of fintech are either benign or small, the FSB believes that “this could change quickly with deeper involvement of the large technology providers”.

One possible route to financial instability identified in the report is that banks may loosen lending standards unwisely. I would assess that risk as low: banks have been there before, in recent memory, and are not keen to go back. But the threat to profitability is real, particularly if loss-leader pricing strategies are adopted, as the FSB believes is possible. They refer explicitly to the risk of cross-subsidisation. Banks in Europe are not much in favour with investors today, trading well below book value in most cases, and a significant loss of market share in payment services would threaten their viability further.

In response, the FSB – unsurprisingly – argues for vigilance on the part of banking supervisors (when, one wonders, have supervisors been told that now is the time to turn a blind eye?). But I wonder if the answer lies with banking supervisors at all. Had a broader range of authorities contributed to the work, they might have more pertinently recommended vigilance from conduct and competition regulators, too. Following the FSB’s own logic, it is in these authorities’ territories where the biggest risks are most likely to emerge.

©️ Project Syndicate 2019