AI regulation in financial services in the EU and the UK: Governance and risk-management
The availability of Big Data, cloud-based hosting services, open-source AI software, and enhanced infrastructure, such as the graphic processing units (GPUs), to train and develop more sophisticated AI systems all have contributed to the rising adoption of AI in the financial services sector. Financial institutions and FinTech are either developing their own AI technology or relying on AI third party vendors for AI solutions.
AI has started to transform business models of financial institutions. Service providers have started to offer AI as a Service (AIaaS), which is a cloud-based service AI outsourcing offering, and financial institutions are integrating AI and ML solutions into their supply chain. More financial institutions are structuring their business models as not just simply B2B or B2C, but to B2B2C or B2B2B, frequently acting as an intermediary that procures AI solutions from third parties and offering them to their clients as part of a bundled product package.
Some common uses of AI/ML technology by financial institutions include: Chatbots, robo-advisors, fraud and money laundering detection for the purpose of AML and KYC checks, assessing creditworthiness and affordability, and evaluating insurance risk. These services facilitated through AI and machine learning allow financial institutions to offer tailored and diverse products to their customers at a cost-efficient manner.
