How regulation could change AI adoption at banks

As fintechs are granted bank charters, the boundary between banks and fintechs gets more porous, and regulation becomes more important. Kirti Choudhary and Vikram Sivakumar, both managing directors and partners at consulting firm BCG, sat down to a conversation about this with Chana Schoenberger, Editor-in-Chief of American Banker.

Transcription:

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Chana Schoenberger (00:09):

And how does regulation fit into all of this? That of course is the bright line between a bank and a fintech.

Kirti Choudhary (00:15):

That one actually increasingly is sort of, again, one of the key questions. I think this year has been marquee in that you’ve had a large number of fintechs getting banking charters. So they will experience what it feels like to be regulated. Many would say it’s sort of leveling the playing field a little bit, but I do think what it also signals is the potential cost of putting the harnesses in place and/or complying itself might become easier due to which you’re finding a lower payers wanting to enter. It also potentially means that they do want to experiment with changing some of the business models. So I think time will tell where and how it shakes out, but just the number of new banks we’re going to have in the next few years will be pretty telling.

Vikram Sivakumar (01:08):

I think we talk a lot about the regulators from the financial sector. I think we’re also going to need to talk about the regulators from an AI perspective on its own. And that’s a conversation that’s also maturing. And so they will meet at some point, but it’s also coming.

Chana Schoenberger (01:24):

Well, that’s assuming that the government starts regulating AI in some –

Vikram Sivakumar (01:28):

Shape or form.

Chana Schoenberger (01:29):

Regular way.

Vikram Sivakumar (01:30):

It’s a conversation and if not a regulation, maybe a standard, but it’s a conversation that’s playing out. And as banks, we’re probably watching both of those.

Kirti Choudhary (01:39):

I think there’s also the question though of one, we have banks which are just local, but there are many large institutions which operate in multiple geographies and they will certainly have more of this to watch out for.

Chana Schoenberger (01:53):

Definitely.