Impact of EU AI Act on various FinTech segments

As the EU AI Act only affects individuals, segments of business which are directly client related, such as digital lending and digital banks, are more impacted by the regulation than other segments. While the focal point of this White Paper is on customer trustworthy AI, it is important to remember that the EU AI Act applies to the deployment of AI systems that affects any EU resident. Thus, it may concern all sorts of AI systems that can be found within a FinTech company.

As a rule of thumb, wealth management with its high level of individualised services and client interaction will be most affected by the EU AI Act. A key feature of the global FinTech market and feel-good package is the broad selection of additional services, for example concierge services. Those services are provided by the actual client advisory and portfolio management sections assisted via AI technology, such as chatbots.

Inevitably, a substantial amount of AI systems are used to deliver such additional services. This includes analysing information about a client’s family, travel routes or health status. Moreover, it is a truism in FinTech that a relationship manager’s assets are information about the client and the client’s environment which is collected to best serve and meet the client’s expectations. Here, FinTechs face difficult legal questions, in particular with respect to unacceptable or high risk AI systems.

As a consequence, FinTech faces three key issues in the wealth management segment:

  1. Currently, AI systems are spread across different systems and kept in various storage places. To comply with the EU AI Act, FinTechs need to understand where and how the AI systems are currently developed and used and need to answer the question on how to structure processes for the future to have an easily accessible holistic view of client data.
  2. It is assumed that wealth managers currently analyse all kind of client information, even sensitive data, often unstructured. FinTechs have to decide how to deal with the AI system development and deployment going forward while retaining a comprehensive overview of AI system governance. FinTechs may implement a clear policy framework and further guidance in behavioural rules for client relationship managers using AI to mitigate the risk of breaching EU AI Act.
  3. How to handle the analysis of personal data pertaining to the client environment such as information about friends and a client’s family?

In view of the significance of cross-border wealth management for global FinTechs, it is also important to address the deployment of an AI system. This will involve interaction with a FinTech’s other business divisions such as investment banking on the product side.

Retail banking faces similar challenges to wealth management with respect to regular interaction with individuals. However, in contrast to the latter, retail banking – thanks to its service-channels – benefits from AI system deployment that is much more organised and trustworthy. Digitalisation can be expected to contribute to standardisation, in particular with respect to how AI systems are deployed in retail banking. Finally, FinTechs’ retail clients are in most cases domiciled globally and are thus mostly out of scope of the EU AI Act.

To become compliant with the EU AI Act, FinTechs may have to substantially redesign business processes, in particular in the retail banking and wealth management segments. This is likely to have a considerable impact on client lifecycle management for a bank, i.e. the different phases of a client relationship: prospecting, on-boarding, servicing/ cross-selling and up-selling and termination.

About the author

Michael Borrelli

Director, AI & Partners

Michael Borrelli is a Director at AI & Partners, Europe’s leading professional services firm for firms subject to the EU AI Act. He has more than 10 years’ experience in financial services, compliance, and technology to help clients navigate the complex and evolving regulatory landscape of AI.

He is also an AI 2030 Chapter Advisor, contributing to the development and dissemination of knowledge, best practices and policy recommendations on AI and FinTech. 

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