If not well-regulated, new consumer financial services technology can threaten privacy, exacerbate bias and lead to predatory products. Regulators need regtech tools that can detect and correct problems, like credit discrimination and deceptive practices, in both digital and traditional products. AIR works with agencies, advocates, academics and industry to promote innovation that protects consumers.
Despite volatile pricing in cryptocurrency markets, digital assets and blockchain technology have the potential to foster more affordable, inclusive and crime-free financial markets. Decentralized finance (DeFi) could reduce transaction costs, while distributed ledgers could revolutionize everything from e-commerce to the Worldwide Web. Blockchains developed for Web 3.0 might even strengthen online privacy. AIR works with regulators and others to develop new frameworks that will foster innovation while preventing harm to consumers, the environment and victims of financial crime.
Thanks to the mobile phone, roughly 70% of adults globally now have a bank account. The emergence of huge, highly inclusive and mobile-first financial markets requires and enables a reimagining of regulatory design to leverage technology and scale up oversight capacity. Regulators in the Global South can leapfrog peers to build a new generation of effective, efficient and agile regulation. AIR works with central banks, regulators and international bodies on TechSprints and other efforts to leverage technology in the drive toward full global financial inclusion and consumer protection.
The effects of climate change on financial services — and vice versa — represent an ever-growing risk. Traditional financial institutions, cryptocurrency firms and other stakeholders are under pressure to reduce their carbon footprint, while companies face systemic concerns related to extreme-weather events. Meanwhile, global efforts to invest in green projects present a new opportunity for financial firms to be environmental stewards. Regulators must mitigate climate change risks without inadvertently “de-risking” in ways that deny capital to the vulnerable. They must also ensure market integrity as businesses compete for customers and investors based on beneficial climate claims. AIR works with partners on creative solutions to reach these goals.
Financial crimes are not victimless. Money laundering funds terrorism. It enables trafficking of illegal arms, drugs, endangered wildlife and human beings. It undermines democracy by helping corrupt government officials cover up bribes. This is an asymmetrical war with criminals using high-tech methods to hide money while the financial industry and authorities still rely on mostly analog technology. The UN estimates a 99% failure rate in finding these crimes. AIR helps governments, banks and technology firms develop and deploy regtech new tools to turn the tide.
Depending on how it is used, digital technology can either worsen race and gender bias in financial services, or combat it and reduce inequity. The murder of George Floyd galvanized society’s determination to eliminate systemic racial bias and gender inequity in all realms, including finance. AIR spearheads initiatives to promote women’s economic empowerment, and works with partners to help Minority Depository Institutions (MDIs) remain competitive as they fulfill their mission to serve African-Americans and other communities of color.
Digital financial markets require digital oversight. Regulators need much more data, much timelier data and AI-based analytic tools just to keep pace with the explosive changes underway in financial products, services and infrastructure. Like the industries they supervise, they need to transform their technology for the digital age.
AIR helps educate the regulatory ecosystem on technology change and helps governments convene TechSprints and pursue other initiatives to advance Regulatory Technology (RegTech) and Supervisory Technology (SupTech) solutions.
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