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Bridging the gap: Policymakers, innovation and privacy in financial services AI

Author

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  • Nelson, William

    (Director of Public Policy and Associate General Counsel, Investment Adviser Association, USA)

Abstract

This paper explores the burgeoning use of artificial intelligence (AI) in the financial services industry, specifically focusing on the tension between its innovative potential and the protection of consumer data privacy. It delves into the recently enacted European Union (EU) AI Act, the first comprehensive AI regulation globally, analysing its provisions impacting the development and deployment of AI in financial services. In addition, this paper examines existing and emerging state laws in USA that address AI regulation, highlighting potential inconsistencies and the need for a more unified approach. Through this comparative lens, this paper discusses key challenges and proposes recommendations for how regulators may foster responsible AI use in financial services while safeguarding consumer data privacy. This paper also addresses how financial institutions can address the risks arising from the use of AI. This article is included in The Business and Management Collection (https://hstalks.com/business/).

Suggested Citation

  • Nelson, William, 2025. "Bridging the gap: Policymakers, innovation and privacy in financial services AI," Journal of Financial Compliance, Henry Stewart Publications, vol. 8(4), pages 375-388, June.
    • Handle: RePEc:aza:jfc000:y:2025:v:8:i:4:p:375-388
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    More about this item

    Keywords

    financial services; artificial intelligence (AI); data privacy; AI policy; AI governance; regulation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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