Senators debate use of AI in financial services

Artificial intelligence could cause larger changes in the U.S. financial system than the social media-fueled Silicon Valley Bank run, Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said today during a committee hearing on the use of AI in the financial services sector. During the hearing, Brown and other committee Democrats raised concerns that recent developments in AI technology could enable discrimination against potential customers, put people out of work and make it easier for criminals to defraud financial institutions. Committee Republicans largely focused on cybersecurity concerns and cautioned against overregulation.

In an opening statement, Brown acknowledged that automated technologies such as instant payments have made banking services more convenient for consumers. However, without consumer protections, “AI could just be a new tool for Wall Street and Silicon Valley to swindle Americans out of their savings, trap them in debt and strip them of their financial security,” he said. “And while some uses for AI—like automated credit underwriting and algorithmic trading—have been in practice for years, what’s known as generative AI is creating new ways to remove human decision-making from financial services.”

Committee member Sen. Mike Rounds (R-S.D.) noted that financial institutions already spend billions of dollars annually in cybersecurity, and that newer technologies that allow individuals to fake voices and appearances could make the problem much worse. However, AI also could be a valuable tool for financial institutions in fighting fraud with its ability to spot patterns and trends, he added. “Financial regulators should allow Congress to act and resist the urge to overregulate new technology as they run the risk of unintended consequences.”