AI sector reacts to increased policy oversight and market uncertainty

By Emma Olsson | 12 March 2020

Despite extreme economic uncertainty, policy makers continue attempts to regulate artificial intelligence (AI) as tech vendors adapt to the latest guidelines set by the European Commission last month, calling for a European AI strategy.

Legal counsels are advising small fintechs and companies leveraging AI to utilise regulation for a competitive edge.

“The advice that we’re giving is to feed into any consultation process as soon as you can, because it can be used almost to get a competitive advantage because if you’re the person that’s feeding in and saying ‘this is how we think you should do this’ then you put yourself in a very good position,” says Mardi MacGregor, senior associate at Fox Williams.

“Then you can make sure that the rules when they do come out are something that can work for you, but also sometimes you can make sure that your business is one of the businesses that succeeds under the new regulation.”

The EU’s whitepaper established a policy framework to align state efforts in legislation and ensure fundamental and consumer rights. The whitepaper accompanied the announcement of an EU-wide data strategy, which aimed to establish rules for data access and flow across states.

Competition and market consolidation are prominent issues within the AI sector. According to a 2019 report by CB Insights, Facebook, Apple, Microsoft, Google and Amazon are the most active acquirers of AI start-ups, investing heavily in the technology.

In attempts to legitimise their practices and assuage concerns over data privacy and ethics, bigtechs have been some of directive’s loudest cheerleaders. In January, Google’s chief executive Sundar Pichai penned an opinion piece for the Financial Times on “Why Google thinks we need to regulate AI.”

But according to MacGregor, small companies will also reap the benefits of increased regulation from a developing perspective.

“I also think for new developers and smaller fintechs, it’s much easier to be able to develop in a certain and consistent environment.

“If you develop some amazing new piece of AI and then two years down the line have to go back to the beginning and redevelop that or adjust it so that it's compliant with some regulation that's only just come out, that's much more difficult than if you have the regulation in the first place where you at least have a sense of what the regulation is going to look like, and you can design your AI with that in mind.”

Yet the market response has been far from unitary. For some software providers, the promise of increased regulation stokes fear due to potential changes to business models and increased compliance allocations.

Alex Kwiatowski, principal industry consultant, global banking practice at software provider SAS, said regulation will not be welcomed by tech companies.

“Where there's technology, there'll always be regulation to one degree or another. In an era of AI and machine learning (ML), and with the 'art of what's possible' frontier rapidly being pushed outward, it's entirely unsurprising for regulatory overseers to be considering how existing legislation needs to be adapted in response to advances in data science capabilities and what prudent new elements should be added,” said Kwiatowski in an email.

Uncertainty surrounding regulation’s market impact provides another concern for vendors, according to Elena Treshcheva, business development manager and researcher at software testing company Exactpro.

“Adoption of standards will undoubtedly complicate the business-as-usual processes as they require the storage of massive arrays of data used to train, refine, and test models to be used in the end product. This increased load on the storage is compounded by a requirement to keep the data there for substantial periods of time. The production life cycle will also be complicated by additional checks carried out by external parties,” she said in an email.

Treshcheva also fears that data sensitivity issues and antitrust policies could prevent some firms from conforming to new regulatory requirements, which could reduce their competitiveness in the market.

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