Existing patchwork regulatory framework stymies widespread adoption of AI in financial services

Recommends clarity for responsible use of AI under current regulations, risk-based approach for industry implementation of AI

‍

Washington, D.C. (August 14, 2024) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies and innovative banks, submitted a comment letter to the Department of the Treasury (Treasury) Request for Information on Uses, Opportunities, and Risks of Artificial Intelligence in the Financial Services Sector (RFI). In the letter, AFC recommended several measures to develop a pragmatic regulatory framework for AI and increase clarity for industry participants to foster the responsible adoption of AI technology in the financial services sector, including technologies that reduce human biases and increase access to financial services for historically underserved communities, as well as improve the resilience of the financial services industry.

“AI has the potential to drive a profound shift in the financial services landscape towards personalized services that better meet consumers’ unique needs – particularly those of underserved communities,” said Phil Goldfeder, Chief Executive Officer of AFC. “A unified federal framework is necessary for setting clear rules of the road and unlocking AI’s staggering potential to create a more inclusive financial system. Responsible industry collaboration with a pragmatic regulatory approach can create a future of finance that increases safe consumer options without compromising on safety and protection.”

Recognizing that AI is already in use across financial services companies, products, and services, AFC seeks to obtain clarity from Treasury under a “unified and cohesive” regulatory framework that would preempt a patchwork of state laws and create room for uses of AI that exceed states’ regulatory jurisdictions. The existing regulatory ecosystem for AI presents significant challenges to widespread adoption of the technology in financial services and ultimately limits innovations that can improve customer access and experience while also building a more resilient, consumer protected financial services industry.

Additionally, AFC points out the essential role of existing consumer protections and governance structures in safeguarding consumer privacy and managing third-party risk. In doing so, AFC asks the Treasury to work with other financial services regulators to comprehensively review and modernize current regulations and provide clarity on how they apply to AI applications in a manner that will encourage innovation.

“A unified federal approach would streamline regulatory requirements, providing clarity and consistency that would enable financial institutions to leverage AI technologies more effectively,” wrote Ian P. Moloney, SVP, and Head of Policy and Regulatory Affairs in AFC’s Letter to Treasury. “By establishing a cohesive regulatory framework, the federal government can facilitate the responsible development and deployment of AI technologies, ultimately enhancing the efficiency and inclusivity of the financial services sector.”

A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative BaaS banks. AFC’s mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

Read full letter here.

###