The Safety vs. Innovation Debate
But America and Britain did not sign the official declaration. J.D. Vance, America’s vice-president, warned against “excessive regulation”, which could stifle innovation. Broadly speaking the French view is that the technology needs to be “safe, secure and trustworthy”, stressing the need to limit the risks of using AI – while Vance accused world leaders of being too rule-bound and wanting to “strangle” AI.
Whichever side of the side you sit on when it comes to the regulation spat, it’s clear AI-safety concerns – and the regulation of this new technology – are the focus of a great deal of the news coverage. And so they should be. This is an important topic.
Regulation in Financial Services: The Need for Nuance
As a fintech, you might expect Target Group to want to be calling for the industry to “cast off the regulatory straitjacket”. You’d be wrong.
While we concede there is an opportunity cost to regulation that might reduce the scope for innovation, our view is that it’s a nuanced situation. We work in financial services which is already a highly regulated environment. There are risks with poorly trained AI delivering poor outcomes for customers; we understand that when the AI used in our space, it has to be safe.
The Need for Adaptive Regulation
So, rather than calling for fewer regulations, what we would like to see is regulation that is fleeter of foot and quickly catches with technological advances – regulation that evolves faster. This is still somewhat self-serving. After all, our clients won’t want to invest in bleeding-edge AI until they have clear regulations surrounding its use. Given the government’s push for growth through regulation, the FCA should take that seriously.
AI in the UK’s Mortgage Market
When it comes to AI rules, our chief concern is the mortgage market (within which we operate) understand that regulation of whatever sort is here for the long-term. This means any lenders, third-party servicers, or brokers looking to embrace and implement AI need to keep pace with changes in its regulation.
It is a fast-changing field, and we dedicate tremendous resources to keeping pace with it. Fortunately, we are a part of the Tech Mahindra group and have access to the combined talents of 147,000 colleagues worldwide, so we are in a good position to do just that. We’ve had to. As part of our modernisation and evolution project we have been developing cutting-edge technology, such as AI, which we are rolling out across Target and are set to bring into the mortgage and loan origination space.
Regulatory Questions
While AI advances over the course of the last decade have prompted concerns that progress in the field is now dangerously rapid, there is no consensus on what should be regulated. Or how. Or by whom. Does the technology itself require rules, or only its applications? What exactly are the risks posed by artificial intelligence?
There are certainly plenty of “AI-doomers” out there (not least Elon Musk) but I’m not all that concerned about a catastrophic Terminator-style war against the machines. I am more worried by the threats posed by bias and discrimination with small language models.
The EU’s AI Act
At the moment, the AI ethics camp has the ear of European policymakers. By way of example, the EU’s AI Act, the world’s first comprehensive AI legislation, came into force on 1st August last year. It is mostly a product-safety document which regulates applications of the technology according to how risky they are. That sounds great but the act is extremely strict.
A startup offering an AI tutoring service needs to set up risk-management systems, conduct an impact assessment, and undergo an inspection – as well as jumping through other hoops.
Regulatory Challenges for Lenders
You can see how easily a lender could easily come a cropper there. That’s why we would urge any lender, broker or servicer looking to harness the power of AI to partner with us so we can navigate a path through this new regulatory landscape together.
Strategies for Innovation – and Compliance
As AI continues to reshape industries around the world, including the UK’s mortgage market, staying ahead of regulatory changes remains paramount for anyone looking to harness its transformative potential – from lenders and brokers to servicers. Partnering with experienced organisations is essential to navigate the evolving regulatory landscape – such as the EU’s AI Act – while ensuring compliance and fostering innovation. Organisations seeking to navigate complex regulations and mitigate risks like bias in AI models that could harm consumers would be well advised to seek guidance. By collaborating with expert partners, industry players can confidently adopt AI, balancing cutting-edge technology with ethical and regulatory standards to drive sustainable growth.
