Regulating Robots: Financial services regulators commit to explore machine learning policies
November 19, 2019
2 min read
What's going on here?
An industry-wide survey of financial services companies has demonstrated the increasing role of machine learning in the sector. The survey was commissioned by regulators, the Bank of England (BoE) and the Financial Conduct Authority (FCA), who have since promised to explore machine learning policy.
What does this mean?
Machine learning (a form of artificial intelligence) has the potential to change the face of the financial services industry. Harnessing machine learning to analyse the big data sets of financial companies could deliver more tailored services with increased efficiency.
Some commentators consider machine learning to be the catalyst for a fourth industrial revolution. Owing to this, the BoE and FCA this year conducted a survey which sought to examine the ways in which artificial intelligence and machine learning is being used, as well as to gauge its full potential. It was found that machine learning was increasingly being used for a range of different purposes such as detecting money laundering and fraud, for trade pricing, and for credit risk management. While firms do not think that the use of machine learning necessarily created new risks, it was considered to be able to amplify existing risk, and therefore more regulatory guidance would be beneficial.
What's the big picture effect?
The survey has given regulators an insight into the benefits and risks of the use of this technology. It was recognised that there were significant benefits bestowed upon both consumers and wider society, but the use of the technology was not without risk. We can expect to see greater regulation regarding the use of artificial intelligence in the financial services industry.
Such regulation may determine what level of decision can be allocated to a machine. It could also determine who would be responsible for the decisions made by a machine. Of course, the large amounts of data being processed brings with it an increased risk of data breaches, which will be a further concern for regulators. Notably, the survey found that many companies had already identified this risk and had taken steps to mitigate it.
Perhaps the most telling insight from the survey is that regulators have suggested a further study be conducted next year, which is testament to the evolving and unpredictable nature of this area.
Report written by Julie Lawford
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