CFPB and European Commission Start Discussion About Digitization of Finance

Didier Reynders, Commissioner of the European Commission for Justice and Consumer Protection, and Rohit Chopra, Director of the U.S. Consumer Financial Protection Bureau (CFPB), on Monday, July 17, announced the beginning of a dialogue on some issues related to the digitalization of the financial industry.

CFPB and European Commission Start Discussion About Digitization of Finance

The officials published a joint press release, which contains a statement that the introduction of digital tools in the financial services sector will have significant consequences not only for the business community but also for ordinary consumers interacting with this industry at the household level. Didier Reynders and Rohit Chopra say that digitalization will affect pricing, service specifics, privacy system, competition, and many other aspects of the existence of the financial system.

Some banks and other organizations operating in the financial sector have already started using artificial intelligence-based tools. Such innovative mechanisms allow for automating the decision-making process. Services like Buy Now, Pay Later, largely change the principles of consumer lending and have a significant impact on spending.

Didier Reynders and Rohit Chopra note that digital payment operations are carried out as soon as possible and do not involve any difficulties. They also stressed that such transactions are increasingly coming under the control of large technology companies. According to officials, this trend has negative prospects. They believe that control by large technology firms increases the risk of fraudulent schemes and the use of various manipulation techniques. Officials also say that if the current state of affairs persists, at some point consumers may face restrictions on the choice of financial products.

Didier Reynders and Rohit Chopra believe that after reaching certain positions in finance, large technology companies can interfere in the process of controlling customers’ personal data and force them to agree to more expensive products and services. Officials note that both sides of the Atlantic are aware of the problem and are taking the necessary measures in this context, but, in their opinion, activities in this direction should be accelerated to ensure compliance with the pace of market development and the growth of consumer needs.

The CFPB in June reported receiving complaints from bank customers who were disappointed with the experience of interacting with chatbots based on artificial intelligence. Such virtual assistants are used by financial institutions to provide customers with answers to questions and solutions to certain problems. Last year, approximately 37% of US residents interacted with the chatbots of banks. Experts are convinced that this figure will grow because the 10 largest American commercial lenders use virtual assistants.

The CFPB says that there is a risk of causing significant harm in cases where chatbots provide false information about a financial product or service. The Bureau analyzed this problem and concluded that banks using virtual assistants can not only provide inaccurate or completely false data but also put the protection of confidential data at risk.

In May, Rohit Chopra said that companies that do not understand the principles on which artificial intelligence makes decisions will not be able to fully apply advanced technology.

As we have reported earlier, CFPB Warns Banks Against Creation of Fake Accounts for Fee Harvesting.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.