Artificial Intelligence, Machine Learning, and Bias in Finance: Toward Responsible Innovation
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ARTIFICIAL INTELLIGENCE, MACHINE
LEARNING, AND BIAS IN FINANCE: TOWARD
RESPONSIBLE INNOVATION
Kristin Johnson, * Frank Pasquale** & Jennifer Chapman***
INTRODUCTION
Over the last decade, a growing number of digital startups launched bids
to lure business from the financial services industry.1 Armed with what they
claim are vast quantities of data and sophisticated algorithmic platforms
capable of interpreting the data,2 these financial technology (fintech)3
* McGlinchey Stafford Professor of Law, Gordon Gamm Faculty Fellow, Tulane University
Law School.
** Piper & Marbury Professor of Law, University of Maryland Francis King Carey School
of Law; Affiliate Fellow, Yale Information Society Project.
*** Ryan H. Easley Research Fellow, University of Maryland Francis King Carey School of
Law. This Essay was prepared for the Symposium entitled Rise of the Machines: Artificial
Intelligence, Robotics, and the Reprogramming of Law, hosted by the Fordham Law Review
and the Neuroscience and Law Center on February 15, 2019, at Fordham University School
of Law. We would like to thank Kathleen Engel for her comments on the draft.
1. Andrew Ross Sorkin, Fintech Firms Are Taking On the Big Banks, but Can They
Win?, N.Y. TImES: DEALBOOK (Apr. 6, 2016), https://www.nytimes.com/2016/04/07/
business/dealbook/fintech-firms-are-taking-on-the-big-banks-but-can-they-win.html
[https://perma.cc/8Z6C-DWKQ]; The Fintech Revolution, ECONOMIST (May 9, 2015),
https://www.economist.com/news/leaders/2 1650546-wave-startups-changing-financefor-
better-fintech-revolution [https://perma.cc/UWF3-Z7PZ].
2. FTC, BIG DATA: A TOOL FOR INCLUSION OR EXCLUSION?, at i (2016),
https://www.ftc.gov/system/files/documents/reports/big-data-tool-inclusion-or-exclusion-
understanding-issues/160 106big-data-rpt.pdf [https://perma.cc/R44Z-P4P5].
3. In previous publications, Frank Pasquale has examined incrementalist fintech,
which utilizes technology to provide standard financial services, and futurist fintech, in
which the entire financial system is remade due to distributed technologies. See Exploring the
Fintech Landscape: Hearing Before the S Comm. on Banking, Hous. & Urban Affairs, 115th
Cong. (2017) (statement of Frank Pasquale, Professor of Law, University of Maryland). In
this Essay, we use the term fintech firms to refer to nondepository financial services firms
that integrate artificial intelligence technology and predictive analytics into their business
models. We acknowledge that, while there is no universally adopted definition for the term
fintech, many use the term as a catchall for a broader group of financial services firms that
integrate a diverse body of technologies and engage in digital transfers, storage, payments
systems, and lending, as well as the origination of virtual currency and robo-advising. See,
e.g., Rory Van Loo, Making Innovation More Competitive: The Case ofFintech, 65 UCLA
L. REv. 232, 238-40 (2018).
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Artificial Intelligence, Machine Learning, and Bias in Finance: Toward Responsible Innovation
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