Blockchain technology is an exciting and new area for the financial services sector, but from an inclusion perspective there are a lot of relevant concerns around whether that might cause exclusion, said Carmelle Cadet, Emtech, Founder & CEO.
Speaking at the Financial Technology and Its Implications for Financial Inclusion panel at the 2021 FINRA Diversity Leadership Summit, she said that blockchain can be used in many different verticals and industries, with the capability of streamlining manual processes and the need for intermediaries, and provide much better transparency and visibility around transactions.
“What we’re seeing right now is a focus on financial services to provide a more streamlined approach to the way money is created, the way money is accessed and the way money is used in the payment system. In addition to that, you see use cases around the potential to create new asset classes that would behave differently from a typical cash or bank deposit that you might have,” she said.
Cadet believes there’s a role on how regulation can help on making sure that diversity and inclusion is part of the the core values and the core outcomes that we can look to when thinking about financial technology.
She added that blockchain can be used in many different verticals and industries, with the capability of streamlining manual processes and the need for intermediaries, and provide much better transparency and visibility around transactions.
Cadet further said that the topic of conversation right now for regulators in the financial services sector is around the emergence of new digital assets that are changing the way money is circulating and has the potential to create a whole new market that is outside of the regulatory space.
“But with that comes a risk. Technology can be designed to provide financial inclusion, it can also be designed to bypass and do money laundering. So it is a double-edged sword,” she said.
“So far regulators have approached us from a position of fear of losing control. Some of the work that we do talks about what are the benefits and the opportunities for regulators and for central banks specifically to be catalyst for innovation,” she said.
Melissa Koide, FinRegLab CEO, added that there are some really important steps that not only the regulatory community, but also Congress are going to have to step into, “in order to make sure that we have a confident financial system”.
The banking community and even the FinTech, the non-banking community, would welcome guidance from the regulators on some of these basic questions with respect to data being used in financial services for particular financial purposes,” she stressed.
During the session, panelists also discussed innovative applications involving artificial intelligence (AI), machine learning and gamification.
The use of gamification in financial services is very much in its nascent stages, said Jason Young, Co-Founder and CEO of MindBlown Labs.
“We’re seeing some examples here and there. But I think that fintechs are really still figuring things out,” he said.
Meanwile, AI and Machine Learning in particular, are being used across a range of purposes in financial services, according to Koide.
She said the industry at large is thinking about the adoption of using AI and machine learning in the many different use cases beyond what they’re using it in today.
“The power there is in the ability to leverage lots and lots of data,” she said.
But the use of machine learning is very sensitive for “fairness, inclusion and disparate impact considerations”.
“So there is a mandatory need to be able to understand how the models are deriving the outputs that they are and the ability to explain it,” she said.