The Consultative Group to Assist the Poor (CGAP) has published an Insights Brief examining how financial sector authorities (FSAs) in emerging markets and developing economies (EMDEs) can leverage AI-powered supervisory technology (SupTech) to strengthen their supervisory capabilities and advance financial inclusion. The adoption gap is stark: while 85% of FSAs in advanced economies use AI-powered SupTech, only 53% of those in EMDEs do so.
The brief argues that AI-powered SupTech offers EMDE FSAs a strategic opportunity to improve operational efficiency, expand analytical reach, and strengthen decision-making across three functions — support, regulation, and supervision — while also advancing financial inclusion by reducing compliance costs and increasing trust in the financial system. FSAs must, however, actively manage key risks: AI governance and accountability, automation bias, and operational and technology risks.
To adopt AI-powered SupTech responsibly, the brief proposes five priority recommendations:
- Strengthen legal foundations for data protection and ethical AI use;
- Pursue an ambitious but realistic digital transformation agenda;
- Strengthen AI risk management;
- Build an adaptive organizational culture; and
- Leverage domestic and international collaboration.
