UK regulators host first Forum to assess use of AI in financial services

• UK regulators are meeting with private stakeholders to assess potential guidelines for the increasing use of AI in financial services.
• Though adding more fintech members would help regulators gather a better understanding of the tech’s benefits and risks.
• Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Fintech industry with the Fintech Briefing. You can learn more about subscribing here.

The Financial Services AI Public Private Forum brings the UK’s Financial Conduct Authority (FCA) and Bank of England (BoE) together with AI experts from financial services, tech, and academia, to assess whether additional guidance or regulation is needed to support the safe adoption of AI in financial services, per the FCA.

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The Forum will host a series of quarterly meetings and workshops over the next year to discuss AI uses and benefits, constraints to deployment, and potential risks. The FCA and BoE opened the Forum to membership applications in October 2019, following the publication of their report on the application of AI in UK financial services.

The Forum aims to tackle AI-related risks amid rising adoption within UK financial services.

• There are public policy concerns over the perceived risks of AI decision-making. AI algorithms that are trained on incomplete or extraneous data, for example, can yield judgments that are biased, causing a range of issues from inconvenient technical errors to inadvertent discrimination. There is also the “black box” issue, where the algorithms are so complex—especially as applications become more mature—that it becomes difficult to explain the AI’s decisions, making accountability and error detection a challenge. The Forum aims to understand the gravity of these issues and what can be done to overcome them.
• AI applications are increasingly embedded in financial services. Two-thirds of UK financial service providers were already applying AI to their operations, per the FCA and BoE October 2019 report, although this was limited to just two distinct use cases for most. The coronavirus pandemic is further accelerating adoption as consumers demand better digital offerings: 45% of BoE-regulated firms reported that the crisis has led to an increase in the importance of AI applications for their future operations.

We think the Forum should add more fintech members to get a better understanding of AI use in the UK and establish guidelines. Only two of the Forum’s 21 expert members hail from fintechs (Starling and MindBridge AI). This is despite fintechs being a valuable source of insights, as they tend to be ahead of financial institutions (FIs) when it comes to using the latest technologies.

Additionally, many FIs are working with B2B fintechs to leverage AI—including forum member Credit Suisse leveraging Appway to speed up its onboarding process—hence, they should be part of guideline development. Bringing more fintechs in the loop would help the UK regulators access a broader range of backgrounds and views, which would result in more accurate and effective AI guidelines.

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