Establishing a pro-innovation approach to regulating AI – Innovate Finance response to HM Government Call for Evidence

12th October 2022 | Blogs, News

About Innovate Finance

Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK. Innovate Finance’s mission is to accelerate the UK's leading role in the financial services sector by directly supporting the next generation of technology-led innovators. 

The UK FinTech sector encompasses businesses from seed-stage start-ups to global financial institutions, illustrating the change that is occurring across the financial services industry. Since its inception in the era following the Global Financial Crisis of 2008, FinTech has been synonymous with delivering transparency, innovation and inclusivity to financial services. As well as creating new businesses and new jobs, it has fundamentally changed the way in which consumers and businesses access finance. 

Introduction and key points

Innovate Finance welcomes the opportunity to respond to HM Government’s Call for Evidence on establishing a pro-innovation approach to regulating Artificial Intelligence (AI). In preparing this high-level submission, we have engaged with a wide cross-section of our membership base, including scale-up banks and Regulatory Technology (RegTech) providers. 

Innovate Finance members’ use cases demonstrate that AI enables firms to create solutions that address tier one priorities for the financial services sector, which align with Government and regulators’ aims, including tackling economic crime and supporting the transition to a Net Zero economy. 

We are therefore extremely supportive of the Government’s intention to take a pro-innovation and principles-based approach to regulating AI. This approach to the development of the legal and regulatory framework for AI will be critical if the UK is to remain a global AI superpower and realise the societal and economic advantages of the technology.

In developing more detailed proposals for the legal and regulatory framework for AI, it will be essential that Government and regulators understand the cross-sectoral scenarios in which the technology may be deployed so as to avoid the creation of multiple overlapping, and possibly conflicting, sectoral rules. We know that FinTechs are already developing products and services that transcend sectors to deliver value to diverse consumer groups. In practice, this means AI systems and the machine learning models that power them will draw on a range of cross-sectoral data sets such as household income, household energy consumption, retail transactions, and spatio-temporal data to name only a few. Care therefore needs to be taken to ensure that there is a harmonised and consistent approach to the regulation of AI across sectors and by the respective regulators. This will reduce overlap, a key challenge recognised by the Government in its Call for Evidence paper, and reduce the regulatory burden for firms and cut inefficiencies for multiple regulators from the outset.

We look forward to further detail being set out in the coming weeks by the Bank of England, Financial Conduct Authority, HM Treasury and the Payment Systems Regulator in their joint Discussion Paper (DP) on AI. Innovate Finance will be submitting a comprehensive response to this DP on behalf of our members.

Innovate Finance would be pleased to discuss our response on a bilateral basis with colleagues from the Office for Artificial Intelligence within the Department for Digital, Culture, Media and Sport and colleagues from the Department for Business, Energy and Industrial Strategy. Additionally, or as an alternative, we would be happy to facilitate discussions with our members and the wider FinTech community.

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