Alibaba’s market edge? AI behavioral mindtricks

Here’s something for our running financial inclusion really means financial intrusion theme, courtesy of Alibaba — the internet marketplace which also benefits from extremely close relations with China’s premier shadow banky Money Market fund YueBao. (Alibaba’s cash management feature feeds the YueBao fund.)

From Techcrunch on Tuesday (our emphasis):

Aliyun, the cloud computing unit of Alibaba Group, is launching an artificial intelligence service that it claims is the first in China. Called DT PAI, the platform combines algorithms used by Alibaba with machine and deep learning techniques and presents them in a simple drag-and-drop interface. Aliyun says developers can use DT PAI to predict user behavior without having to write new code. While the bulk of Alibaba Group’s revenue still comes from its e-commerce business, it has been investing heavily in cloud computing. In July, Alibaba announced that it had pumped $1 billion into Aliyun with the goal of expanding into global markets, including Southeast Asia (where it recently opened a data center in Singapore), the Middle East, and the U.S.

As we warned in April, it seems inevitable that a company like Alibaba will eventually challenge China’s state monetary authority with regards to the issuance of growth inducing “inflation proof” currency.

For one thing, through its connections with Yuebao, it’s already a de facto asset-backed liquidity issuer. You could, for example, consider Yuebao’s RMB holdings as quasi foreign reserve (custodial!) assets, liabilities it can manage providing:

  1. its units can always be redeemed on-demand for RMB without breaking the yuanbuck — (so by ensuring no mal-investments).
  2. it can ensure nobody ever wants to redeem the RMB because its own units guarantee as much purchasing power for life’s essential goods (if not more) within its own platform, and capture consumers completely.

It’s with regards to point two that artificial intelligence and data analytics can have an influential role.

If you can persuade and influence users to spend platform units in a way that benefits the platform rather than them — say via discounting, gift points, offers, marketing or advertising — you can ensure flow always matches up with product availability in an inflationary stable manner. So part of the story here relates to the use of personal customer data to groom and manage consumer choices. (Think Tesco and Amazon.)

The second part of the story comes in using customer data to anticipate trends in consumption and act pre-emptively to ensure shortages never manifest by incentivising suppliers to adapt quickly to demand — something that can be achieved by providing cheap platform credits to the right producers.

One thing to bear in mind: RMB rate cuts increase the asset-liability mismatch for money market funds like Yuebao, meaning market liquidity risk grows as interest rates fall.

Yet, according to Red Pulse research, Tianhong, the asset manager which manages the Yuebao fund, is protected from such risk. Why? Because it uses “predictive redemption analytics, built from Alipay” to help it stabilize flows.

Predictive analytics that can, we assume, offer a potential MMF redeemer just the right deal on a pair of shoes to stop it cashing out in RMB terms, or alternatively, by using reactance techniques to create the impression that a traditional redemption gate isn’t really a redemption gate, because “these are not the redemptions you’re looking for”.

Source: Alibaba’s market edge? AI behavioral mindtricks

Via: Google Alerts for AI

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