How regulation could change AI adoption at banks

Expect the technology you use to approve customer financing to come under much tighter scrutiny. Regulators are increasing their focus on how banks and fintechs use artificial intelligence. For a retailer or service provider, this means the 'black box' credit decisions your customers receive will soon require more transparency. If your lending partner uses AI to determine creditworthiness, they may be forced to slow down their rollout of new products to ensure they comply with fair lending laws. The push for regulation is gaining steam as more fintech companies seek bank charters. This matters to your business because fintechs are often the ones providing the flexible BNPL and 'no-credit-check' options you offer at the point of sale. If these lenders face higher regulatory hurdles, you might see changes in approval rates or the types of data they are allowed to use when evaluating your customers. Regulators are particularly worried about 'algorithmic bias,' which is when AI unintentionally discriminates against certain groups of people. Banks are now being asked to prove their models are fair, which could lead to a temporary tightening of credit as lenders recalibrate their systems to meet these new government standards.

Source: American Banker — Top News

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