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Finance to face ethical challenge or become ‘algocracy’

Big data, machine learning and behavioural science could come together to make an algocracy more than just science fiction, according to the chair of the Financial Conduct Authority (FCA). In a speech due to be given later today, Charles Randall, Chair of the FCA and the Payment Systems Regulator (PSR), is to tell participants at the Reuters Newsmaker event in London that the financial services industry must anticipate the fundamental questions which big data, artificial intelligence and behavioural science present, and ensure that ethical innovation shapes the answers. He will outline a scenario in which algorithms shape our financial future, determining aspects of finance from how much insurance we pay to the size of our mortgage. Citing some of the positive improvements due to advanced technology (such as better detection of financial crime, cheaper and faster transactions and access to affordable financial advice), Randall also warns that the industry should be careful: “The UK fintech industry is world leading and bursting with new ideas. But there is no room for complacency.”

Some of the questions raised during the speech, around the topic of big data, automated decision-making and behavioural science, include:

  • the role of humans in the financial industry when a growing number of processes, including decision-making, are automated;
  • the responsibility of consumers in making informed choices (of note here is research suggesting that, 10 years ago, if the typical individual using online services actually read the privacy policies before clicking ‘agree’, they would have spent about six working weeks reading online T&Cs every year... this would probably be far longer in 2018);
  • the adequacy of global frameworks for competition and regulation to manage the power of big data corporations that provide essential financial services, considering that T&Cs are often non-negotiable and non-transparent;
  • the ethics of using big data about our health and private lives to determine credit limits or insurance premiums.

Randall's speech continues: “We need to anticipate the fundamental questions which big data, artificial intelligence and behavioural science present, and make sure that we innovate ethically to shape the answers. Society in general and policy makers in particular need to think about how to mitigate the risk that an algocracy exacerbates social exclusion and worsens access to financial services in the way that it identifies the most profitable or the most risky customers.”

He concludes that sustainable financial innovation will be built on purpose, people and trust. See the FCA website for the full transcript of the speech.


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Bank Relationship Management & KYC
Know Your Customer
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