Access to finance for Artificial Intelligence regulation in the financial services industry

Abstract

This paper discusses the design of the legal and regulatory framework for using artificial intelligence (AI) in financial services markets to enhance access to finance (financial inclusion). The author argues that the development of AI should continue to adhere to the regulatory objectives of market safety, consumer protection, and market integrity. However, to ensure equality and fairness, access to finance should be made a clear policy choice. In Part I, the paper discusses how AI can lead to systemic risks and market manipulation on trading platforms. For example, by examining the use of algorithms for trading on the capital market, the author outlines the regulatory objectives and the possible methods of regulation for peerto- peer platforms. In Part II, it discusses how the use of AI to provide consumers with investment advice, such as financial advice provided from robo-advisers, can close the investment advisory gap and provide consumers access to finance. The current regime does not provide adequate protection to financial consumers in this regard. In Part III, the paper focusses how AI can be used as a form of RegTech to streamline compliance processes, thereby increasing competition in financial markets and providing a benefit to consumers. However, this use may be in conflict with privacy, data protection, and ethical concerns. The author makes policy recommendations and suggests some directions for governance in the use of AI in financial services to enhance access to finance. The findings of this paper are relevant to research on the future governance of artificial intelligence in financial services, public policy innovation, and urban development.