Karan Jain
CEO
There is growing interest and activity amongst governments and regulators in the ethical use of data and applications of AI. This is driven by AI applications across the financial services product lifecycle from designing personalised customer services to automating compliance functions.
In response, the UK established the Centre for Data Ethics and Innovation, in October 2022 the FCA launched a discussion paper on AI and the European Commission unveiled its proposed Artificial Intelligence Act in April 2021 with the aim of setting a global standard for AI by fostering innovation, industrial capacity, and safety.
In September 2022 the fourth set of compromises of the EU’s AI Act was shared, and MEPs continue to debate the legislation. The Commission and its Member States have joined forces on policy and investments. It is good to see the regulatory authorities and policymaking bodies in the field acting on AI propositions through a risk-based and human-centric approach as they carry out the European Union’s (EU) vision end-to-end by ensuring that the AI strategy aligns with the fundamental rights and EU digital acquis.
The AI Act aims to regulate AI models via coordinated regulatory sandboxes that will allow innovators and regulators to test, experiment and validate innovative AI systems under agile governance.
What is a digital sandbox for AI and how it helps businesses?
So what might a typical digital sandbox for AI look like? Digital regulatory sandboxes are the latest in a new set of tools for regulators to develop and test policy and engage with the technology ecosystem.
Digital regulatory sandboxes provide data sets, sandboxes for AI model building and testing, integrated technology to accelerate access to AI for start-ups and small businesses, increase industry collaboration to encourage legal and regulatory certainty and enable tests of the implementation of policy and common approaches.
Using a digital sandbox for AI is not new to businesses in the financial services sector such as banks, asset managers and wealth managers who have been leveraging the tools to accelerate their partnerships with emerging technology providers to best serve their end customers and drive internal efficiencies.
What are the key developments so far in AI-related regulations?
- The AI Act attempts to regulate AI models via coordinated regulatory sandboxes that will allow innovators and regulators to test, experiment and validate innovative AI systems under agile governance.
- The Act is also witnessing an impact beyond Europe – Brazil’s Congress passed a bill to create a legal framework for artificial intelligence in September 2021.
- A pilot of the first AI regulatory sandbox was presented in June by the government of Spain and the European Commission. This sandbox initiative acts as a step in future-proofing and aims to promote the best practice guidelines in operationalising AI activities.
- Certain amendments have been considered so far to the initial draft of the AI Act, with the latest compromise text mandating the establishment of at least one AI regulatory sandbox by each member state.
- The member state also needs to consider the possibility of setting up the sandboxes at the regional or local level, jointly with other countries, or in collaboration with the European Data Protection Supervisor or the member states.
Why should banks and financial institutions consider leveraging a digital sandbox for AI integration?
AI is an enabling technology which is supercritical for consumer well-being and for the progress of digital and financial services. Hence, we will only see more uses and applications in financial services.
Digital sandboxes through Digital Transformation Platforms offer a safe and secure method to assess the implications of AI algorithms, manage the ethical use of customer data and tools for governing data ethics and enhance consumer privacy, transparency and control.
This is critical to ensure a proactive and preemptive analysis of risks and opportunities and rewards involved is essential with the mass adoption of any progressive new technology.
Learn how NayaOne can help by reaching out to our team of specialists
Reach out to us to know more about how NayOne can help your business with cutting-edge solutions such as our proven AI sandbox so you can experiment with new products and services that use advanced technologies such as AI/ML and allow the innovation to flourish while still protecting consumers.
