Digital Sandbox for the AI Economy

Digital Sandbox for the AI Economy
Picture of Karan Jain

Karan Jain

CEO

There is growing interest and activity amongst governments and regulators in the ethical use of data and applications of artificial intelligence (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 (AI) 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.

So what might these Digital Sandboxes 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.

Digital Sandboxes for AI are not new to the financial services enterprises 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.

Key developments so far:

  • 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.
AI is an enabling technology – supercritical for consumer well-being and for the progress of digital and financial services. And so 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 pre-emptive analysis of risks and opportunities and rewards involved is essential with the mass adoption of any progressive new technology.
Reach out to us to know more on how NayOne can help you experiment with new products and services that use advanced technologies such as AI/ML and allow the innovation to flourish while still protecting consumers.

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