The Global Financial Innovation Network has published a report on the use of consumer-facing AI in global financial services. The GFIN, spearheaded by the FCA and the Dubai FSA, carried out a study during 2024 on several use cases of customer-facing applications, including robo-advice, personalised finance and consumer education. Key observations from its research include:
- while robo-advice in the financial services sector is not new, AI provides the potential to leverage customer data and machine learning algorithms to lead to personalised recommendations. This can lead to simplified, cost-efficient, round-the-clock access, but it is critical to understand how robo-advisers make decisions and processes on assessing suitability, and making disclosures and providing other essential customer information. The report notes that robo-advisers paired with adequate human oversight could be more resilient to market volatility. However, there are obvious risks about data security and how the product would react to temporary or permanent customer vulnerability. Respondents also highlighted the need for appropriate safeguards to keep a human “in the loop”. Emotion AI brings with it specific risks of bias, while ethical AI is a significant aspect of understanding AI in robo-advice services;
- AI brings the opportunity for new and tailored products for consumers, particularly through open banking. Personalised products are already in place, so any regulatory approach must recognise the current situation and address whether existing risks are increased or decreased by AI. The report noted that outcomes-based, technology-neutral regulation can be helpful in providing guidance and clarity while not stifling innovation; and
- AI has great potential to generate information that the financially uneducated can easily digest and also to improve education and access to products and services generally. But there is a risk of bias and misleading information which must be managed.
Regulators are currently taking a variety of approaches, including horizon scanning and exploratory work and putting in place cross-organisational initiatives. The report summarises the current activities of the FCA and DFSA as well as the Indian, Canadian and Israeli regulators.