Report
AI systems are increasingly deciding access to essential financial services, like who gets a loan or bank account, and how much insurance costs. Yet Europe’s rules aren’t keeping pace; they’re retreating.
This report urges EU policymakers to reinforce the bloc’s AI, financial and consumer protection laws to ensure financial inclusion and safeguard consumers.
The use of AI in retail finance jeopardises consumers
The deployment of AI in retail financial services yields benefits to both financial institutions and consumers. Financial institutions reap cost reductions and efficiency gains, while consumers see faster sales processes and around-the-clock assistance.
However, AI’s use in retail finance is fraught with risk. Consumers can be charged discriminatory prices or mis-sold inappropriate financial products. In some cases, they can even be denied access to essential financial services, such as bank accounts or insurance products. These harms disproportionately affect vulnerable consumers and can damage public trust in both AI and the financial system, where trust is of the essence.
Current EU rules leave dangerous gaps in protection
Many of the laws and regulations governing financial services were written before AI became widespread. Worryingly, they cannot sufficiently manage the risks posed by complex, opaque and highly automated systems.
While the EU AI Act introduces new rules, it only covers a limited number of financial applications. Most retail financial services remain outside its scope and current sector-specific legislation does not offer adequate protection.
Instead of addressing these shortcomings, the EU has abandoned the AI Liability Directive in the name of simplification and competitiveness. As a result, consumers remain exposed to harm and have limited avenues for redress when things go wrong.
Call to policymakers
Given the risks AI poses to retail finance consumers, Finance Watch calls on policymakers to urgently close the regulatory gaps in the EU’s legislative framework.
Upgrading and reinforcing the Union’s AI and consumer financial services legislation would better protect European consumers while enhancing trust in both AI and the wider financial system.
- Designate AI systems used in the provision of all retail financial services as high-risk under the EU AI Act.
- Update sector-specific consumer financial services legislation to introduce rules that address risks unique to financial services, and/or require tailored solutions that cannot be adequately addressed in the AI Act given its cross-sectoral/horizontal scope of application.
- Introduce an EU-harmonised AI liability regime that allows consumers to easily seek redress in cases where damages are caused by the use of AI by financial institutions.
