Artificial intelligence (AI) has taken the financial world by storm in the last few years and has quickly found its way into every business and sub-sector there is. Perhaps unsurprisingly, regulations can struggle to keep up – leading to fresh calls for enhanced regulatory clarity regarding AI.
The American Fintech Council, the industry association representing responsible fintech firms and banks, has recommended a number of measures to develop a pragmatic regulatory framework for AI to the Department of the Treasury.
In June, the Treasury Department issued a request for information on the use of AI in financial services. In response to this, the American Fintech Council (AFC) sent a letter detailing its recommendations to develop regulations for AI and to increase clarity for industry participants.
Through this, it hopes to help foster the responsible adoption of AI technology in the financial services sector, including technologies that reduce human biases and increase access to financial services for historically underserved communities, as well as improve the resilience of the financial services industry.
Phil Goldfeder, CEO of the American Fintech Council
“AI has the potential to drive a profound shift in the financial services landscape towards personalised services that better meet consumers’ unique needs – particularly those of underserved communities,” explained Phil Goldfeder, CEO of AFC. “A unified federal framework is necessary for setting clear rules of the road and unlocking AI’s staggering potential to create a more inclusive financial system.
“Responsible industry collaboration with a pragmatic regulatory approach can create a future of finance that increases safe consumer options without compromising on safety and protection.”
AFC explained that because it recognises that AI is already in use across financial services companies, products, and services, it wants clarity from the Treasury under a ‘unified and cohesive’ regulatory framework that would preempt a patchwork of state laws and create room for uses of AI that exceed states’ regulatory jurisdictions.
Combatting existing regulatory challenges
The existing regulatory ecosystem for AI presents significant challenges to the widespread adoption of the emerging technology in financial services; potentially limiting innovation that could improve customer access and experience, as well as help build a more resilient, consumer-protected financial services industry.
“A unified federal approach would streamline regulatory requirements, providing clarity and consistency that would enable financial institutions to leverage AI technologies more effectively,” wrote Ian P. Moloney, SVP and head policy and regulatory affairs in AFC’s Letter to Treasury. “By establishing a cohesive regulatory framework, the federal government can facilitate the responsible development and deployment of AI technologies, ultimately enhancing the efficiency and inclusivity of the financial services sector.”
AFC also explained that it recognises the ‘essential’ role of existing consumer protections and governance structures in safeguarding consumer privacy and managing third-party risk. The fintech industry association is asking the Treasury to work with other financial services regulators to comprehensively review and modernise current regulations and provide clarity on how they apply to AI applications in a manner that will encourage innovation.
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