alan greenspan : consumer finance remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the federal reserve systema€™s fourth annual community affairs research conference, washington, dc, 8 april 2005. * * * it is a pleasure to be here today as you conclude your discussions about our dynamic consumer finance market. our nation's vibrant financial services industry is remarkable in many respects, with myriad providers offering consumers a broad range of transaction and credit options. the industry is central to the functioning of our robust consumer sector. therefore, it is essential that policymakers, regulators, bankers, researchers, and consumer groups remain fully engaged in monitoring developments in the consumer finance market and continually seek to better understand the strengths and weaknesses of the financial services industry, including how well it serves lower - income and underserved consumers. evolution of the consumer finance market a brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. especially in the past decade, technological advances have resulted in increased efficiency and scale within the financial services industry. innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. from colonial times through the early twentieth century, most people had quite limited access to credit, and even when credit was available, it was quite expensive. only the affluent, such as prominent merchants or landowners, were able to obtain personal loans from commercial banks. working - class people purchased goods with cash or through barter, since banks did not make consumer loans to the general public. however, more - intense industrialization and urbanization during the late nineteenth and early twentieth centuries dramatically changed the market for small consumer loans. urban wage earners used credit to help them purchase the vast array of durable goods being produced by the new industrial economy, such as automobiles, washing machines, and refrigerators. naturally, this growth in demand fostered increased competition for consumer credit, and, most important, the development of new intermediaries to supply it. early in the twentieth century, many new organizations that focused exclusively on the needs of consumers entered the field, and the structure of consumer finance began to change dramatically. semi - philanthropic groups, called remedial loan societies, were formed to combat the high - rate cash lenders. "

in core processes – in areas that are of high regulatory importance – we notice that it is used in parallel to already existing models. in the sense that both the old and the new run next to each other. this shows that, currently, there is not yet enough confidence in the new technology to replace the older technology – the risk of regulatory mistakes is still deemed too high. the financial sector as a whole is, indeed, on an ai odyssey – a long and eventful journey towards its destination. a journey with setbacks and progress. a journey with an unclear and uncertain path forward. but also, i hope, a journey that is fuelled by the very idea of becoming a financial sector that has embraced ai to its fullest potential – 1 / 4 bis - central bankers'speeches and that does so with respect for the values that underly our society, like fairness, freedom and security. rules and regulations reflect these values. they are instrumental in protecting them. and as our society changes and certain values come under pressure, rules and regulations need to change accordingly. dnb is currently supervising ai within its prudential and aml / cft mandate. with this mandate, we ensure the stability of the financial system, and the solidity and integrity of financial institutions. the european ai act, which came into effect earlier this year, broadens our mandate. in our ai supervision, we will now also take account of fundamental rights, like privacy and non - discrimination. these changes also affect the financial sector, of course. they create uncertainty. at de nederlandsche bank, however, we are committed to creating regulatory certainty around ai supervision in the financial sector, for instance in our contributions to the european supervisory authorities, and the bank of international settlements. we won't stop encouraging financial institutions to explore and experiment. at the same time, we want them to be confident in discussing their progress with us. because we believe this is part and parcel of a successful odyssey. as a supervisor, we are fully aware that ai is here to stay. already in our 2022 report'from recovery to balance ', we called for the use of machine learning in transaction monitoring and kyc risk profiling. we did this because we are convinced that it will help build better predictive models – models that will benefit financial institutions, because they can conduct more targeted and efficient due diligence. models that also benefit society as a whole. precisely because ai is capable of raising more targeted red flags