Impact on AI on Retail Financial Services, Roundtable for Mills Review.
Last month the Financial Inclusion Commission hosted a roundtable where executive director Sheldon Mills of the Financial Conduct Authority received input from civil society organisations for the Mills Review into the Long-Term Impact of AI on Retail Financial Services.
The FCA does not have an easy task to strike a balance between the opportunities and risks of AI in retail financial services. Consumers often don’t get the financial services they need because of digital exclusion, products that aren’t fairly designed or marketed, low financial capability and low trust - and the financial inclusion gap hits vulnerable consumers hardest.
AI tools that act in the consumer’s interest could help to close that gap, providing guidance and searching for good deals, but AI could also be used against consumers in exploitative or fraudulent ways.
Points raised included:
Addressing exclusion: the risk that AI widens the financial inclusion gap, as innovations are targeted at wealthier customers, and those without access or capability to use technology fall further behind.
Prioritising inclusive innovation: in light of that risk, the FCA should prioritise inclusive innovation and help consumer-centric AI agents and other services to emerge. In the meantime, the FCA must grapple with the reality that millions of people are already using Chat GPT-type tools for financial questions. The FCA should also be alive to the risk that firms invest in AI for product sales, but fail to invest as much in their after-sales service functions.
Tackling bias, explainability and transparency: to address the risk that AI perpetuates structural racial, gender and other biases (already alleged about insurance products) the FCA must be willing to investigate firms’ AI systems. This will require adequate resources as well as deeper engagement and cooperation from the Information Commissioner’s Office (ICO).
Constructing the regulatory framework and standards, and reducing fraud: there’s a risk of regulatory overlap and underlap, with not only with the ICO but other regulators including the Competition and Markets Authority, as well as authorities which are not part of the Digital Regulators Cooperation Forum such as the National Crime Agency.
We need a cross-authority plan to address AI risks and opportunities for retail consumers, with appropriate reporting and oversight. While we edge towards understanding the right legislative and regulatory responses to AI, a financial services industry code of conduct could help to fill the gap, providing guidance with standards of best practice.
Thanks to Sheldon and the FCA team, and to representatives of Cash Access UK, Citizens Advice,Fair4All Finance, Fair By Design, Fairer Finance, Money and Mental HealthPower To Prosper, Rooted Finance and StepChange Debt Charity for taking part in the discussion.
A link to the Financial Inclusion Commission’s own submission to the Mills Review can be found here.
