As artificial intelligence worms its way into more aspects of our lives, laws and regulations governing its use will become necessary.
We can’t uninvent technology, so the only thing that protects us from the worst aspects of it are the agreements that we make as a society – namely laws and regulations.
What will those laws look like? Bills in states like Tennessee, Hawaii, and Florida seek to address focused problems like the use of AI in political campaigns and deep fakes. Other states, such as Illinois, are looking at AI more generally, and these may provide some clues for what is to come in the future.
Bills in the Maryland House and Senate offer a starting point for thinking through how artificial intelligence might be evaluated regardless of the purpose of any particular AI tool.
The bills would require that State agencies not use AI for anything that could be considered “high-risk,” which is defined as programs or services that could lead to unlawful discrimination, a disparate impact against a group of people based on some characteristic, or “have a negative impact on the health, safety, or well-being of an individual.”
That last clause could cover a lot of territory. It could easily be taken to mean that Maryland cannot use AI for making medical decisions or using AI databases for law enforcement, for example. While we might agree that AI should not be used for some purposes, there are others where AI might be both useful and acceptable. For example, this bill could cover using AI to identify unemployment or tax fraud which can be difficult for humans to identify just because of the sheer volume of data. Could it be interpreted broadly enough that the state could never operate self-driving snowplows?
On top those provisions, Maryland agencies would also need to evaluate any current AI tools in use, conduct regular reviews of AI in government, and notify any people or groups of people who may have been hurt by decisions made by AI tools.
This is a recognition that AI is already a part of our lives and is being used to make decisions that affect us. As it begins to advance, it makes to evaluate how it has performed so far and start repairing any damage done.
It’s not hard to imagine that bills like Maryland’s at the state level will eventually lead to a national discussion around what parameters should be set on AI. The industry should stay abreast of these conversations and think proactively about what boundaries they have out in place around their own use of new technologies.
The “Dark Web” is where people think most illegal e-commerce transactions happen, but sometimes they are hiding in plain sight on the world wide web.
In the latest episode of the IPA Payments Pod, Sarah Craven, the product manager for transaction laundering detection products at G2 Risk Solutions, discusses how companies mask e-commerce transactions.
Sometimes they are selling illegal goods, and other times they are selling content or goods that pose a reputational risk for the acquiring bank.
We discuss how bad actors use various ruses to disguise what they are really selling, how transaction laundering threats have evolved, and why it pays to trust your gut.
This podcast was recorded on January 18, 2024. Things may have changed by the time you hear it.
You can find the podcast here, or wherever you get your podcast. Please remember to like it, leave us a review, and share it with your colleagues to help others find the show.
When a paycheck arrives can be just as important as its size. A mismatch between the timing of paychecks and bills can have huge affect on household finances.
In the latest episode of the IPA Payments Pod, Matt Pierce, the founder and CEO of Immediate, an earned wage access provider discusses what led him to found Immediate, how earned wage access contributes to financial health, and how EWA stacks up against payday loans.
This podcast was recorded on January 11, 2024. Things may have changed by the time you hear it.
The new year is off to a fast start built on the momentum of the regulatory proposals of 2023.
In the latest episode of the IPA Payments Pod, the IPA’s CEO Brian Tate, and its COO, Ben Jackson, discuss the current state of regulation and what is coming in 2024.
They talk about how payments companies should plan in light of the regulatory proposals from 2023 that are still active. They cover on-going court cases that could shape the industry. They also discuss how the election might affect the regulators’ plans for the rest of the year.
This podcast was recorded on January 11, 2024. Things may have changed by the time you hear it.
On October 31, the Consumer Financial Protection Bureau published its proposed rule on open banking. The proposed rule would require banks, credit unions, and other financial services companies to share account and transaction data with consumers and authorized third parties. It also would require that data providers create developer interfaces, which make it easier for third parties to access data. Providers are worried about liability for breaches, and the possibility that some companies could become credit bureaus under provisions of the rule. Comments were due by December 29, 2023.
The IPA has filed a comment letter on behalf of its members in response to the rulemaking. This blog is separate from that letter and sums up some of my personal thoughts about the proposal and open banking in general. A copy of the comment letter is online.
This proposal comes into a market where individuals already use multiple financial services. As Ron Shevlin, the Chief Research Officer at Cornerstone Advisors, noted in a Forbes Column that six out 10 consumers who opened a checking account in 2022 and 2023 say they have more than one checking account.
So, it is not as though open banking regulations will give people more choices. If people believe it is hard to move accounts because they have direct deposits or automatic bill payments established, that reflects their inertia (and maybe the difficulty of dealing with their employers). Alternatively, some people could simply be happy with the account products they currently have.
But the CFPB sees it differently.
In a press release in October, Director Rohit Chopra said the goal of the rule was to “to give consumers the power to walk away from bad service and choose the financial institutions that offer the best products and prices.”
That overlooks the main point: There is nothing preventing that now.
The press release goes on to say that the proposed rule will protect consumers from “junk fees” by making” personal financial data available, at no charge to consumers or their agents, through dedicated digital interfaces that are safe, secure, and reliable.”
Most people would agree that customers should have access to their data, but the CFPB seems to believe that every fee is a “junk” fee. They also seem to think that safe, secure, reliable digital interfaces are free to build and maintain, and that customer service agents, bank tellers, and account managers work for free.
There is a question of sustainability and access for consumers when no consideration is given to keeping the lights on. If we want financial products to exist, then someone must provide and maintain them.
Another fundamental question is whether a business should be required to provide its customers’ information to a competitor, even at the customer’s request. If customers want to give their data to another company, then it is their right do so, but why why should a company be compelled to provide a portal into its systems for competitors to steal their business. In any case, it certainly seems reasonable to let a bank or other provider charge their competitor for the service – just like they would charge any other business for a service provided.
It is important to protect consumers, and regulation is an important part of that. But protecting consumers also means ensuring companies can create and provide access to necessary products and services. Sustainability needs to become a core principle of regulation. Oherwise regulators risk forcing consumers into a situation where they have nothing but bad choices for financial products.
The beginning of the new year brings new strategies for companies and resolutions for individuals designed to make them more successful.
But success is not always just a result of what a company or an individual does. Sometimes, there are larger forces at work.
In the latest episode of the IPA Payments Podcast, the IPA’s CEO Brian Tate, and its COO, Ben Jackon, discuss Malcolm Gladwell’s Outliers, which examines these larger forces.
The book explores how being successful can depend on context, and how success is not always just a matter of hard work or having the best idea or strategy. We look at what the factors for success are and what lessons the book has for business innovation.
This podcast was recorded on December 11, 2023. Things may have changed by the time you hear it.
You can find the podcast here, or wherever you get your podcasts. Please be sure to subscribe, leave us a review, and share it with colleagues who may be interested.
Innovation is often associated with speed, but good work takes time.
Systems and Methods Inc., or SMI as they are known, is taking the long view when it comes to developing its business strategy.
One core piece of that strategy is helping low- and moderate-income people build wealth, which is not an overnight process.
In the latest episode of the IPA Payments Podcast, Bo Stone, the chief strategy officer of SMI, and Wesley Stone, SMI’s director of government affairs discuss the company’s decade to decade approach to growth and how its products are evolving to open up new opportunities for SMI and its customers.
This Podcast was recorded on December 12, 2023. Things may have changed by the time you hear it.
You can find the Podcast here, or wherever you get your podcasts. Please be sure to subscribe, leave us a review, and share it with colleagues who may be interested.
The regulators seem to want to put coal in the stockings of payments companies this year.
Over the past few weeks, regulators have released a variety of regulations that could reshape the payments industry and have plans for more in the new year.
In the latest episode of the IPA Payments Pod, Brian Tate, the IPA’s CEO, discusses proposed rules on interchange, open banking, and big tech companies. We also talk about what the regulators say is on their agenda for 2024.
This podcast was recorded on December14, 2023. Things may have changed by the time you hear it.
You can find the episode here, or wherever you get your podcasts. Please be sure to subscribe and share it with your colleagues who might be interested.
In the latest Federal Reserve (issued Oct. 25) proposed rule on debit interchange, the big news was that banks with more than $10 billion in assets would pay a lower interchange fee when their customers use a debit card. More importantly, the proposal would also give the Fed the power to change the interchange cap every other year based on data from bank surveys on transaction costs.
However, the Fed wants to make this change without going through the standard procedure of issuing a proposed rule, taking public comments, and issuing a final rule. Instead, they would just set the debit interchange rate behind closed doors.
Maybe this is their attempt to make up for the fact that this is the first time the board has revisited the fee cap since it was initiated in 2011.
Whatever the reason, this is not the hallmark of good public policy.
As the payments system evolves with new technology and business models, relying solely on transaction cost surveys may miss important information that public comments could bring to light.
We know that merchants, large banks, and other payments providers are affected by changes in interchange rates, but so are consumers. The effect on consumers is downstream from the bottom line changes that banks and merchants might see. But even small banks will feel downward pressure on interchange from revised caps. Additionally, consumers could see their payments options change if the sustainability of traditional products declines.
The Board should adhere to the Administrative Procedures Act’s requirements for notice and public comment before making any additional modifications to the interchange fee cap, so that all stakeholders have a chance to review and weigh in on this important topic.
Gift cards are expected to make up a larger part of holiday shopping budgets, according to new research from Blackhawk Network.
In the latest episode of the IPA Payments Podcast , Jay Jaffin, chief marketing officer at Blackhawk, discusses the expected growth in gift card purchases, why cards benefit merchants and shoppers, and how banks and other companies can make use of the trend.
This podcast was recorded on November 6, 2023. Things may have changed by the time you hear it.
You can find the episode here, or wherever you get your podcasts. Please remember to leave a review and share it with your colleagues who might be interested.
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