The UK economy is increasingly powered by big data and technologies that enable platform business models, advanced analytics, smartphone tech and peer-to-peer networks. The financial services sector is heavily reliant on this data and has transformed its operating model to support the needs of the new tech age.
Central to coping with big data is machine learning which has wide-ranging applications that allow it to study immense quantities of data and solve complex problems at high speed.
Machine learning supports new products and services, reduces market friction and inefficiencies, and ultimately helps customers by reducing costs and helping asset management firms become more responsive and effective.
In the first half of 2019, the Bank of England and the Financial Conduct Authority ran a joint survey of over 100 financial institutions including banks, credit brokers, e-money institutions, financial market infrastructure firms, investment managers, insurers, non-bank lenders and principal trading firms. Their goal was to understand the current use of machine learning in UK financial services.
While the survey is not representative of the entire economy or indeed the entirety of the financial services sector, it does provide a market snapshot with some interesting findings...
The report findings are consistent with the view that machine learning will be an important part of the way financial services are designed and delivered in the future. The technology will potentially be used in areas critical to financial markets and the safety, soundness and conduct of firms. But it will also be usefully applied in areas that are not critical from a regulatory point of view.
In addition, the report found that regulators will want to engage with, and build up, an understanding of the technical aspects of machine learning. The report cites that these could be issues around model risk management, which some respondents highlighted as a specific constraint to the deployment of machine learning. There are also questions regarding software and data validation, the governance, resilience and security of machine learning applications within financial services, as well as potential ethical issues that arise from the use of machine learning and novel data sources.
You can read the full survey report here.
Waverley Court, Wiltell Road, Lichfield, Staffordshire, WS14 9ET
Tel:+44 (0)1283 495245,
Hubwise Securities Limited © Copyright . All rights reserved. E&OE
Registered No: 06071374 Authorised and regulated by the Financial Conduct Authority No: 502619
Site developed by ClientsFirst