Algorithms are an integral part of how FinTech works. They have greatly improved efficiency and enabled FinTech companies to provide consumers with better products and services. Financial services providers use algorithms to optimize their interactions with their clients and improve customer interfaces. AI also can improve the quality of consumer products and services and allow firms to increase their efficiency and effectiveness in many areas, such as providing better quality services to consumers, offering better prices or to prevent discrimination between certain groups.
But firstly, FinTech companies use algorithms and AI to maximize their profits. Thus, some providers may misuse algorithms, with or without intention, often through unfair filtering, biased automated decisions or taking more advantage of the vulnerability of some consumers, for example. These may cause detriments to consumers but also to competitors. This means that the use of biased algorithms can lead to harmful products for consumers. If the algorithms, the way and the purpose for which consumer data are used are not explicable and transparent, it could also be increasingly difficult for regulators to combat unfair practices and take effective measures to counteract consumer and competition harm.
FinTech companies must ensure that they have adequate governance, and the projected algorithms will be continuously improved and optimized, using ethically any data that is useful. The legislative framework must also ensure that these companies will comply with these goals and will adopt high standards in the use and processing of consumer data.
