Regulating the Development of Driverless Finance

Document Type

Article

Publication Date

5-13-2019

Abstract

Before permitting driverless cars to operate on the open road without a licensed driver, lawmakers and innovators are working to ensure the safety not only of the passengers in those cars, but also of third parties – particularly other drivers and pedestrians. Safety concerns figure much less prominently, however, in discussions about fintech and the increasing algorithmic automation of finance. While the use of algorithms in finance is nothing new, the ubiquity, sophistication, and autonomy of financial algorithms has increased significantly in recent years with advances in computing power and data usage techniques. Increasingly automated financial decision-making (a phenomenon that I have termed “driverless finance”) has generally been praised for increasing efficiency and inclusiveness, particularly as applied in the marketplace lending and robo-investing business models. To the extent that any concerns have been raised about these business models, the focus has been on privacy violations of, and discrimination against, financial consumers.[1] But there has been very limited consideration of the potential negative externalities that driverless finance could generate for third parties. In a forthcoming Harvard Business Law Review article, I begin to address this lacuna by examining how increasingly autonomous financial algorithms could cause or exacerbate financial crises, generating economic conditions that harm society as a whole.

Source Publication

The CLS Blue Sky Blog

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