Navigating the Future of AI in Financial Services
1-13-2025
Insights from Treasury’s Acting Assistant Secretary of Financial Institutions, Laurie Schaffer
Why it matters: AI is reshaping financial services, offering significant advancements in efficiency and accessibility while introducing challenges related to fairness and privacy.
The big picture: Treasury is committed to harnessing AI’s potential while managing its risks, particularly in consumer finance and insurance sectors.
KEY POINTS
AI’s Promise: AI technologies have become integral to financial services, enhancing everything from fraud detection to customer service. Treasury’s Bureau of Fiscal Service implemented AI for fraud detection, recovering over $375 million since early 2023.
Emerging Risks: AI poses risks in three main areas:
- Design Risks: Poor data quality can lead to biased outcomes, perpetuating existing inequalities.
- Operational Risks: Increased reliance on third-party cloud services can obscure visibility into AI models, heightening cybersecurity vulnerabilities.
- Human Interaction Risks: Misuse of AI outputs can lead to harmful decisions, emphasizing the need for human oversight.
AI in Consumer Finance: The CFPB notes that around 45 million consumers lack traditional credit scores. AI-driven models can enhance access to credit for underserved populations but may also raise privacy concerns due to the extensive data they utilize
AI in Insurance: A survey revealed that 88% of auto insurers and 70% of homeowners insurers are exploring or using AI. While this can improve efficiency and reduce costs, it also risks perpetuating biases in underwriting and pricing
What’s Next: Treasury will continue monitoring AI’s role in financial services, focusing on responsible innovation and regulation that prioritizes consumer protection and equity.
Role of ETA: Schaffer acknowledged events like ETA’s annual Fintech Policy Forum are vital for fostering dialogue and understanding as we navigate the evolving landscape of AI
Our Thought Bubble: As AI technology evolves, ETA is at the forefront, representing the interests of the industry to ensure a fair and balanced environment that benefits the industry and the interests of the American public.
- ETA published AI fast facts to educate Capitol Hill on how the industry uses and does not use AI.
- ETA organized a fly-in for member executives to meet lawmakers in the Senate and Capitol Hill to speak about AI.
SOURCES
https://home.treasury.gov/news/press-releases/jy2620
About ETA
The Electronic Transactions Association (ETA) is the world’s leading advocacy and trade association for the payments industry. Our members span the breadth of significant payments and fintech companies, from the largest incumbent players to the emerging disruptors in the U.S. and in more than a dozen countries around the world. ETA members make commerce possible by processing approximately $56.75 trillion annually in purchases and P2P payments worldwide and deploying payments innovation to merchants and consumers.
ETAs membership spans the breadth of the payments industry to include independent sales organizations (ISOs), payments networks, financial institutions, transaction processors, mobile payments products and services, payments technologies, and software providers (ISV) and hardware suppliers. For more information, visit electran.org.