AI’s Uncontrolled Growth Raises Concerns of Impending Financial Crisis, Experts Warn
The rapid and uncontrolled growth of artificial intelligence (AI) has raised concerns among experts, who warn of an impending financial crisis. These concerns were voiced at the recent Fintech is Dead. Long Live FinAI summit organized by the Parliament Street think tank.
More than 70 industry experts, academics, and chief executives attended the summit to discuss the potential impact of AI on both the public and private sectors. The timing of the summit is significant, as it precedes Prime Minister Rishi Sunak’s global AI summit scheduled for November.
The worries over AI’s untrammeled expansion were underscored by Gary Gensler, the head of the Securities and Exchange Commission (SEC), who expressed his fears that the technology could trigger a financial crisis within the next decade. Gensler’s concerns were discussed during the Parliament summit, where experts highlighted the rise of genAI—a form of AI that has the capacity to semi-automate much of the traditional knowledge work associated with finance roles.
Michael Mortenson, Associate Professor at the Gillmore Centre for Financial Technology, emphasized genAI’s potential by stating, We are seeing the rise of genAI. More than just picture and text generation, genAI’s ability to work with both human input and data analysis tools has the clear potential to semi-automate much of the traditional knowledge work we associate with finance roles.
However, the unchecked growth of AI poses significant challenges in terms of regulation. Jamie Beaumont, founder of Playter, highlighted the difficulty of regulating an ever-evolving technology. With AI’s trajectory becoming increasingly unpredictable, the question of how to effectively regulate it arises. Beaumont stated, One of the biggest problems I find is regulating something that you don’t know is very hard. The trajectory of AI has gone crazy over the last year, when we don’t know the next step or where AI will be in a year, how do we regulate?
Dominic Duru, co-founder of DKK Partners, echoed these sentiments. He emphasized that understanding AI is crucial for effective regulation, stating, If you can’t understand, you can’t regulate. The businesses are the ones that understand what needs to be stopped.
Gary Gensler, the head of the SEC, further discussed the challenges of regulating AI in an interview with the Financial Times. He mentioned that regulating AI is a complex task due to the potential widespread use of the same base models by various financial institutions. Gensler noted that these models might not even be developed by regulated financial firms but by technology companies not governed by the SEC and other Wall Street watchdogs. He stated, It’s a hard financial stability issue to address because most of our regulation is about individual institutions […] And this is about a horizontal [matter whereby] many institutions might be relying on the same underlying base model or underlying data aggregator.
During the summit, Uday Samant, the Minister of Industries of Maharashtra, India, called for a closer partnership between the UK and India in AI strategy. Samant proposed offering British firms financial incentives to invest in his country, highlighting India’s state-of-the-art infrastructure within its AI Park, which helps minimize initial setup costs for companies.
As AI continues to rapidly advance and reshape various industries, the need for effective regulation becomes increasingly urgent. Addressing these concerns will require a collaborative approach from governments, financial institutions, and technology companies to ensure the responsible and sustainable growth of AI.
Overall, the Fintech is Dead. Long Live FinAI summit provided a forum for experts to discuss the potential benefits and risks of AI in the finance sector. The summit revealed the challenges of regulating AI effectively, particularly in an environment where the technology is evolving at an unprecedented pace. As the global community grapples with these issues, collaboration and informed decision-making will be essential to harness the transformative power of AI while mitigating potential risks.
