Barefoot Innovation Podcast

A special episode today, and a short one – it’s just me, sharing what’s on my mind as I head onto the autumn speech circuit. I think of it as a fall harvest of new ideas, and I want to offer a few suggestions on how to gather in the best ones. 

 

The conference season is in full swing. For me, it’s dominated by two huge events. I’ll be speaking twice at Money 2020 in Las Vegas, and then I’ll be at the Singapore Fintech Festival in November. I’ll also be at numerous other events, as will many of my AIR colleagues. In-person conferences are fully back post-pandemic, and I will hope to see lots of Barefoot Innovation listeners, from now until the year-end holidays.

 

As we zip up our luggage and climb into cars and onto airplanes, it’s a good time to think about what we want from these intensive face-to-face gatherings this year. I’m going to share some suggestions on how to leverage your time and travels to advance the ball on financial innovation, including regulatory innovation.

 

First, think about this. One huge change has occurred since last year, and you all know what it is: Generative AI. No matter what events you go to, it’s a safe bet that everyone will be talking about it. There will be sessions on GenAI, and there will be discussion of it threading through most of the speeches and panels, regardless of the specific topic. 

We all already know that GenAI is a game changer, but we might not have noticed that it changes some games in ways that aren’t obvious. GenAI has done something that I have not seen from any other technology development: it has escalated a technology trend onto the short-list agenda of nearly all the senior people in the financial ecosystem, including the regulators.  

Has that ever happened before? We obviously see lots of tech developments capture the attention of regulators. For example, regulators work actively on how to protect data privacy, how to regulate digital assets, how to regulate stable coins — we all see these efforts every day. But Generative AI is different. People can see that it has the potential – even the probability – to transform nearly everything we do and how we do it. And quickly! It has everyone’s attention. 

That creates an opportunity that I’ve never seen before. Pretty much every risk manager, including every senior regulator, has at some point in the past year sat down with their colleagues and asked the questions. How does this technology work? What risks will it cause? Will it change the risks we oversee? And importantly, how might it change how we look for them? 

For the conference circuit, then, I recommend going to everything you can get on AI, including generative AI. Seek out the sessions with the tech people who actually understand how it’s made, not just how it might be used. And look for the answers to the following questions – or ask these questions of the speakers, yourselves! They fall in three categories:  Risks, benefits, and new tools. 

AI Risks:

What are the specific risks you’re worried that AI will create for financial consumers, and small businesses too?

For financial consumers, will it lead to new scams?  How will people be protected? Are our current laws and regulations adequate, or do we need new ones?

Another big arena of risk is how generative AI will further drive financial crime and corruption.

 

AI Benefits:

On the positive side, we should be exploring how AI, and especially generative AI, help financial consumers. What’s the potential that it will make financial services more transparent, easier to evaluate? Might we have tools that can detect hidden fees, insurance loopholes, products that generate high complaints? What’s the chance that consumers may actually get their own personal AI assistant, to take care of budgeting, paying the bills, saving, investing, protecting our data, and much more? (I, myself, find this the most exciting possibility.)

 

AI Impact on the Regulatory Process:

And third, how will Generative AI change the regulatory process? I served as a judge at the recent TechSprint held by GFIN (the Global Financial Innovation Network) — on how regulators can detect “greenwashing” – companies trying to attract investors by making untrue claims about their environmental and climate impacts or carbon neutrality. We saw solutions that were really startling, using AI to, almost instantly, compare things these companies had said in different kinds of reports and statements, and to external analyses. Tools like this in the hands of regulators could profoundly change how regulatory bodies look for risk and noncompliance — and how the industry does the same.

 

The Regulators’ Tech Deficit:

The other question I hope we’ll all be asking the regulators we see at conferences this fall is, how are they, themselves, upgrading their technology for the age of AI? How old is their own technology stack? Where are they on the journey to cloud computing? What are they doing to reshape their cultures, and to train their teams, and to hire talent, to become agile, adaptable organizations that can keep up with the breathtaking pace of change underway in the industries they oversee? Like all the rest of us, they have their work cut out. 

For those of us who care about these challenges, let’s drive that conversation at all the gatherings coming up. Come to regulationinnovation.org for a list of the public events we’ll be at this fall, and there is also a longer list of smaller and invitation only ones where I’m sure I’ll see many of you. I’ll look forward to it!