Among the recommendations are the introduction of suitability requirements for AI-driven financial services, and add-on capital buffers based on AI algorithms. The OECD has published a new report offering policy recommendations to ensure the use of artificial intelligence (AI), machine learning (ML) and big data in finance is consistent with financial stability, consumer protection, and market integrity and competition objectives. While noting that AI can drive competitive advantages for financial firms, improve their efficiency, and enhance services for consumers, the report says AI applications in finance may create or intensify financial and non-financial risks, and give rise to potential financial consumer and investor protection concerns around the fairness of consumer results, data management and data usage. The report says emerging risks from the deployment of AI techniques need to be identified and mitigated to support and promote the use of responsible AI, and existing regulatory and supervisory requirements may need to be clarified and adjusted to address incompatibilities of existing arrangements with AI applications. In particular, policymakers should consider sharpening their focus on better data governance by financial sector firms to reinforce consumer protection across AI applications in finance, and address risks related to data privacy, confidentiality, concentration of data, and unintended bias and discrimination.
Hear the word "fintech" and you're apt to conjure up visions of young professionals day trading stocks, splitting the check with a payment app, and closing on a mortgage without setting foot in a bank. Fintech -- a portmanteau of "financial services" and "technology" -- has certainly earned that stereotype: those applications are mobile-first, customer-centric, and disruptive to risk-averse industries, all hallmarks of modern fintech. But the industry's reach is much broader, extending to the back offices and financial ledgers of banks, insurers, property management firms, government regulators, and more. Globally, financial technology is projected to reach a market value of $305 billion by 2025, according to Market Data Forecast. That growth is fueled by rapid consumer adoption and by businesses -- particularly small and medium-sized enterprises -- turning to fintech for banking and payments, financial management, financing, and insurance.
FinTech is the application of new technologies by financial institutions to connect and better serve consumer and business customers. With the widespread use of mobile devices such as smartphones, laptops, and tablets, FinTech applications can be utilized in virtually every financial transaction. Two–thirds of consumers between the ages of 18 and 29 have a mobile phone and use mobile banking. Some of these transactions include grocery shopping, online purchases, wire transfers, or any B2C or B2B transaction can be settled via a financial technology. Payments between businesses and consumers can now be made quickly and seamlessly.
Regulatory compliance is timeconsuming and expensive for both financial institutions and regulators. The volume of information that parties must monitor and evaluate is enormous. The rules are often complex and difficult to understand and apply. And much of the process remains highly labor-intensive, when even the most automated solutions are often incompatible with other systems and, even today, most still depend heavily on manual inputs. As a result, costs have risen significantly for financial institutions in recent years.