UK: FCA publishes report on technology risks across financial services
The Financial Conduct Authority ('FCA') published, on 18 February 2020, its annual Sector Views report ('the Report') in which it identifies open banking and open finance, Big Data, artificial intelligence ('AI') and data use, FinTech, and new technologies, as topics having the greatest impact on the financial sectors it regulates. In particular, the Report highlights that open banking presents some challenges for data security and sharing due to greater data sharing, particularly with new entrant firms.
Moreover, the Report states that use of Big Data and AI will increase the insight and data that firms have, and is likely to affect pricing decisions, which could lead to concerns about unethical data use if more personalised pricing, particularly, for insurance and credit products, leads to unfair pricing and/or consumer exclusion.
In addition, the Report notes that FinTech poses challenges for regulation and oversight, and, lastly, it highlights that new technologies and the ways they interact can make firms vulnerable to cybercrime, fraud, and technology outages, with rapid innovation raising questions about the adequacy of new firms' controls to both safeguard client funds and prevent misuse of their systems for financial crime, including fraud.