On May 9th congresswoman Maxine Waters (D-CA), chairwoman of the House Committee on Financial Services, announced the creation of two task forces on Financial Technology and Artificial Intelligence. The committee, also known as the House Banking Committee, oversees the operation of the financial services industry and its regulatory agencies. The task forces were created to keep Congress well informed on the technological developments of the financial sector and to allow them to make educated decisions regarding policy and regulation.
Task Force on Financial Technology
The Task Force on Financial Technology, chaired by Congressman Stephen Lynch (D-MA), is focusing on the rapidly expanding range of financial service apps and other consumer-centric developments. Congressman Lynch mentioned that developments in financial technology will “vastly improve the use and quality of services” but acknowledged the inherent security risks associated with the new palate of mobile finance apps.
Task Force on Artificial Intelligence
The Task Force on Artificial Intelligence, chaired by congressman Bill Foster (D-IL), is educating Congress about the use of artificial intelligence and machine learning in financial processes. Congressman Foster described the technology as being “at the forefront of innovation” and discussed the profound impact of AI on identity security, business practices, banking, investing and mortgage processing.
Effects on Financial Regulation
The inception of the financial technology and artificial intelligence task forces will likely benefit all types of financial institutions, from regulatory agencies to the big banks. Guided by a more informed Congress, regulators will be able to effectively monitor the new, more complex aspects of financial operations. Better-educated regulators can help to maintain transparency in the financial sector and ensure the legal and ethical application of artificial intelligence and other technologies across the industry.
Despite the implication of additional regulatory oversight, banks and other financial institutions should also look forward to the work of these task forces. The stated goal of these task forces is not to increase regulation but rather to “make sure that responsible innovation is encouraged” and to “maintain the competitiveness of our nation’s financial services sector.” Thorough knowledge of financial technology and artificial intelligence will result in a more accepting, technologically progressive Congress. This, in turn, will allow FinTech organizations to expand and innovate even faster.
What it Means for Banks and Other Financial Institutions
Furthermore, more regulatory oversight for FinTech will serve to mitigate any potential risks that organizations might face in experimenting with automation, artificial intelligence, mobile services, or other technologies. The findings of the task forces can supplement their own research, help to identify potential security challenges, and clarify their legal obligations to eliminate any would-be liabilities.
Congress’s preemptive interest in FinTech will help organizations in the industry to avoid the pitfalls that companies like Facebook recently faced. Facebook went out on a technological limb, expanding beyond the limits of regulatory purview. They made assumptions, took risks, and opened themselves up to congressional hearings, FTC investigations, lawsuits, and billions of dollars in quarterly legal expenses. Several technology pioneers including Microsoft and Apple have actually been actively seeking more effective regulation, in part to secure them against the liabilities that Facebook and others have faced in recent months.
A more informed Congress will allow the entire Fintech sector to safely avoid the traps that Facebook faced. The new task forces are making it safer and easier for banks, mortgage lenders, insurance companies and other organizations to innovate and experiment with new technology. As Congressman Foster himself said, “Developments in AI are at the forefront of innovation that is changing the way Americans operate in the marketplace, how we think about identity security, and how we do business”. By creating guidelines and eliminating risk, Congress will enable those organizations to focus solely on the virtually unlimited upside of AI and FinTech innovation.