As we stand on the threshold of the Fourth Industrial Revolution, the landscape ahead includes developments in areas such as blockchain, internet of things, and nanotechnology: developments that are taking place at a faster rate than many of us are able to keep up with—or even easily comprehend.

Artificial intelligence (AI) is one of these very interesting areas of development that could revolutionise our day to day lives, much as the internet did in the last century.

The term AI is often used to refer to the development of computers, computer programs or applications that can, without direct human intervention, replicate processes which are traditionally considered to require a degree of intelligence, such as strategy, reasoning, decision making, problem solving and deduction processes. For example, an AI program can use algorithms to analyse datasets and make decisions and take actions based on the output of the analysis—an analysis that would traditional be done by a human. AI programs can also be developed to interact with people in ways that mimic natural human interaction, for example in online customer service support—sometimes in to an extent that the difference is hard to recognise (the ‘uncanny valley’).

Potentially AI has the potential to supplant a great number of human processes, and it can do so cheaper, faster and without human error. However, in practice the current applications and opportunities are much more limited and constrained by practical factors such as the sheer processing power that is required, especially pending a breakthrough in quantum computing, and ‘design’ limitations such as the inability to learn by extrapolating from limited failures, or to apply common sense to scenarios.

Roseyna jahangir

Roseyna jahangir

Is this development a good thing? AI can cut costs, eliminate human error, and potentially make products and services available to those who might not otherwise be able to access them. But what about the possible downsides?

50 years ago, in the film 2001: a Space Odyssey, an AI slowly turns from being the humans’ assistant, to pitting itself against them. HAL, the Heuristically programmed ALgorithmic computer, ‘realises’ the fallibility of humans stands in the way of it achieving its operational objectives, and therefore seeks to remove these obstacles. Presciently, this film encapsulated many of the present concerns about AI—what will stop the machines ‘deciding’ to exercise the powers they are given in a way that we don’t like? For example, what is our recourse if we need a computer to evaluate a request from us, such as deciding whether or not to accept a job application, and the computer says no? We can try to appeal to other humans on an emotional level, or challenge the basis for their decision; a computer programme that is implacably based on an incomprehensible algorithm does not present that option.

Regulation is the most frequent knee-jerk response to any such question of ‘what if…’. However, many regulators are cautious about imposing regulation in a vacuum, seeking to prescribe or proscribe technologies rather than focusing on particular applications of technologies. The well known risk of doing otherwise is the outcome that technology will develop so quickly that regulation will always lag behind.

In the financial services space, AI has already been making inroads on market practices, as evidenced by: • Behavioural Premium Pricing: Insurance companies have been deploying algorithms to, for example, price motor insurance policies based on data gathered about the prospective policyholder’s driving habits.


Roseyna is a member of the financial services team at legal firm Womble Bond Dickenson, where she provides practical advice and assistance on a broad range of financial services issues, including the requirements of the Financial Services and Markets Act and the Consumer Credit Act and related rules and regulations, financial promotions, applications to the Financial Conduct Authority for authorisation and for variations to permissions, the requirements of the Payment Services Regulations and the FCA and PRA’s rules. You can reach her on roseyna.