International Monetary Fund Managing Director Christine Lagarde issued a warning over the weekend about the impact artificial intelligence may have on the financial system across the globe.
Reuters reported Lagarde said that technology companies’ use of big data and AI increases big tech companies’ dominance in the mobile payments market, which could result in policymakers around the world rethinking how they regulate the banking system and how they ensure financial settlements are made safely and securely.
“A significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence,” Lagarde told a symposium on financial technology held on the sidelines of the G20 finance leaders’ meeting in Fukuoka, southern Japan, reported Reuters. “This presents a unique systemic challenge to financial stability and efficiency, and one I hope we can touch on during the G20, and address in a cooperative and consistent fashion.”
According to the official, although technology and innovation will modernize the financial markets, it could also make them vulnerable because payment and settlement systems will be in the hands of a small number of tech companies. “Over the last five years, technology growth in China has been extremely successful and allowed millions of new entrants to benefit from access to financial products and the creation of high-quality jobs,” she said. “But it has also led to two firms controlling more than 90% of the mobile payments market.” Reuters noted that looking at the pros and cons of financial innovation is one of the many topics that will be discussed among the Group of 20 finance ministers.
The meeting also resulted in the Group of 20 finance ministers announcing they will work together to create common rules to close corporate tax loopholes. Tech companies are accused of using them to get around paying higher corporate taxes.