Policy brief
Finance Watch has responded to the European Commission targeted consultation on artificial intelligence in the financial sector. Finance Watch highlights that while the use of AI in finance can benefit consumers, it also brings important consumer risks that must be mitigated by proper supervision and regulation.
On 9 September 2024, Finance Watch responded to a consultation of the European Commission on artificial intelligence in the financial sector. Finance Watch highlights that the use of AI in the provision of retail financial services can bring some benefits to consumers, but also bears considerable consumer risks that must be addressed:
- The use of AI in the provision of financial services brings with it financial exclusion risks. For example, with regards to insurance products, the granular risk assessments (highly personalised pricing) enabled by AI tools (e.g. through the use of wearables/telematics) could render vulnerable consumers ‘uninsurable’.
- The use of AI systems in the financial sector also facilitates price optimisation practices, i.e. practices where, with the help of algorithmic tools, firms set prices/fees for financial services and products based on the consumer’s price sensitivity (willingness to pay more).
- The use of AI tools in the provision of financial services also brings with it discrimination risks, i.e. consumers being denied a financial service based on discriminatory outcomes of AI-assisted decisions. Most current instances of machine learning, especially deep learning, neural networks-based systems are severely limited with regard to the transparency and explainability of the outcomes they generate.
