Disruptive technology: How are AI and fintech transforming the economy

Amanda Blanco:

Artificial intelligence has already had huge social, economic, and environmental impacts. Its effects are continuing to expand, and interest in what AI will mean for all of us is only growing.

In a speech earlier this year, Federal Reserve Governor Christopher Waller said AI was (quote) "taking the world by storm."

Christopher Waller:

We read about it every day and many of us have used it in some way or another. In my lifetime, I have never seen a technological revolution quite like this - and I have seen the birth of space exploration, the rise of the personal computer, the explosion of the internet, and then smartphones. While all transformative, none match the potential that AI has in changing our lives and doing so at breathtaking speed.

Amanda Blanco:

Research firm Gartner projects that worldwide spending on AI will exceed $2.5 trillion in 2026. That's up 44% from the year before.

But as big as AI is, several other emerging technologies that don't get nearly as much attention also have the potential to greatly affect our lives.

Boston Fed President Susan M. Collins said those include payments technologies and new ways to instantly gather and analyze data. She also cited the rapid growth of digital platforms where people can exchange information and conduct transactions.

Susan M. Collins:

Technology-enabled disruption is not distant or abstract. It's a set of ongoing changes that when taken together, are shaping economic activity in meaningful ways, and already influencing economic outcomes - from how people work, how firms compete, to how payments move and how people access financial services. And in many areas, the pace of change appears to be accelerating.

Amanda Blanco:

Collins and Waller made their comments at the 2026 Technology Enabled Disruption conference. The annual conference was co-hosted virtually by the Federal Reserve Banks of Boston, Atlanta, and Richmond.

In this episode of Six Hundred Atlantic, we'll take a close look at the issues discussed at the event. We'll also focus on how these evolving technologies might influence our economic future. And we'll examine what we need to watch out for, and how we can make sure these changes bring broad benefits.

Collins said technology-enabled disruption is something that's of great interest to the Federal Reserve, because the Fed must understand it to do its work effectively.

Susan M. Collins:

These developments have a direct impact on the Federal Reserve's core responsibilities. Technology-enabled disruption is an important economic force. It can influence productivity, employment, inflation, and also the structure and the resilience of the financial system. And understanding these dynamics helps inform how we think about the Fed's dual mandate of maximum employment and price stability. And it relates directly to the Boston Fed's overarching mission, which is a vibrant economy that works for everyone.

Amanda Blanco:

I'm your host, Amanda Blanco. All the material and quotes from this episode are taken directly from the conference, except for quotes from Boston Fed Chief Information Officer Mike Rodehorst, who we interviewed after the conference.

AI was a big topic from the minute the conference began, and speakers said it's truly changing how businesses operate across a range of industries and sectors.

When people talk about AI in everyday conversations, they're usually referring to chatbots like Claude, or ChatGPT. But how do these bots actually work?

Rodehorst says they're fed by what people in tech call "large language models," a type of AI model that's been "trained" on huge amounts of data.

In other words, the model is given enormous amounts of information, and it uses that information to recognize patterns and make predictions about the word or response that comes next.

Mike Rodehorst:

These chatbots are really the interface into these generative AI large language models.

The way these models work at their core is they're basically predicting the next phrase or sentence based on that training data, on what you fed them with the question or your prompt. You can think about it like when you're typing on your mobile phone and you're typing a text and you'll see auto-complete try to predict the next word or the rest of the sentence. That's kind of the same concept that these large language models are doing, but they're much more powerful models and they're trained on a really larger, vast set of data.

And so that's why it feels much more conversational. They're able to respond in full phrases, sentences. They're able to summarize content. They're even able to produce code for software development based on all of that training data.

Amanda Blanco:

Rodehorst said AI has been a key focus in the tech sector for decades, and he even studied it as a college student in the '90s. But it wasn't until the early 2020s that he saw it explode into the mainstream:

Mike Rodehorst:

AI chatbots have even been around for some time. But where this explosion in popularity kind of really took shape was late 2022 into early 2023 when OpenAI released ChatGPT and that first kind of large language model, generative AI capability that was mainstream and heavily downloaded took shape. That's when it really was that explosion and transformed it from maybe a niche technology topic into mainstream, where it's the focus of the media cycles and became a boardroom strategic topic.

Amanda Blanco:

People are using chatbots for a wide variety of reasons, from shopping, to planning trips, to asking for personal advice - and sometimes even financial advice.

Here's MIT Professor Andrew Lo:

Andrew Lo:

The opportunity is if you could have a financial advisor that knew how your portfolio was doing at all times, if the financial advisor read and digested every piece of financial news published and was able to speak to you anytime, day or night, and was completely trustworthy. That's the opportunity that we're facing now with this disruptive technology of large language models.

Amanda Blanco:

Swati Bhatia, who leads retail banking for Santander Bank in the U.S., said these new tech tools can be incredibly powerful - but they must be paired with sound human judgement.

Swati Bhatia:

I think technology is equal to data and information. It is an enabler. It's a very powerful enabler. It gives us - how we assess risk, how we anticipate customer needs, how we deliver services at scale. It helps us move faster, see patterns earlier. But at the same time, you know, it tells us how we decide, but doesn't replace why we decide. So, technology is a disciplined partnership with human judgment - provides clarity, provides foresight, but ultimately, we decide weighing fairness, resilience, and value creation for customers and for broader economy.

Amanda Blanco:

But if a true partnership is developing between AI and humans, it's worth asking if AI can be fully trusted. Lo said that when it comes to financial advice, chatbots really can't be.

He said that while these chatbots seem competent and somewhat reliable, it's not clear who exactly is legally accountable for the advice given by bots and how secure users' personal data really is.

Andrew Lo:

The bottom line is that AI advice, without governance, without consequences, is not fiduciary advice, and we need to address that.

Amanda Blanco:

It's still unknown what broad AI adoption would mean for the overall workforce. One thing is certain: It will bring continuous change that companies and workers will be forced to continue navigating.

So, who has the best chance of doing this successfully?

Dante Disparte, the chief strategy officer of fintech company Circle, said he doesn't think AI will necessarily take people's jobs - but other people who are better skilled at using AI might.

Dante Disparte:

And I think the people who will do the very best in these environments, whether at a bank, a central bank, or in a private company, are the people who realize a big change is happening and are getting firsthand frontline experience themselves.

Amanda Blanco:

Bhatia, from Santander, said she thinks a mindset shift and openness to change will be critical for workers going forward:

Swati Bhatia:

What we need in existing workforce is just change mindset, not resist it, just accept it. The change is happening. And the, you know, the phrase that got me was the pace of change today is the slowest it is ever going to be. Think about that, which is, it is very fast today, and it is only going to become faster. So, one skill that all of us, everybody in every organization, needs is change acceptance…

So, roles don't get replaced. People don't get replaced. They have more tools available to them to do their jobs better. Their acceptance of these tools just needs change management mindset.

Amanda Blanco:

The buzz around AI may be the loudest, but other technologies are also changing how people interact with finance, banking, and the overall economy.

Here's Nick Stanescu, an executive vice president at the Boston Fed, talking about recent developments in payments technologies:

Nick Stanescu:

We're seeing a lot of diversity in the payments space. New companies, new products, and new channels have introduced an explosion of choice in how businesses and consumers pay and get paid.

Amanda Blanco:

Fintech companies, faster payments, and data and analytical tools that can expand access to credit are changing how people are managing their finances.

For instance, having access to faster or instant payments can allow people to pay their bills earlier or on time. And that can be the difference between financial stability or stress for households and small businesses, said Saurav Sharma, a vice president at Intuit. He said fast access to liquidity - or cash - is essential:

Saurav Sharma:

The liquidity timing shapes the financial outcomes for both consumers and small businesses. What we see on our platform is that small businesses - for small businesses, cash flow means survival, getting paid, getting access to credit, paying employees on time. These are all existential concerns. And for consumers, liquidity means stability. How do consumers access funds more predictably? Whether it is a paycheck, a tax refund, it can be a difference between a financial stress and financial confidence for consumers.

Amanda Blanco:

Technology isn't just getting people their money more quickly. It's also opening new paths to credit for people who previously wouldn't qualify.

So, who are the lenders? Fintechs: financial technology companies that aren't banks and don't have to follow banking regulations.

Duke University Professor Manju Puri discusses what's happening:

Manju Puri:

Banks are largely lending to prime borrowers. Fintechs are expanding across the board. And in particular, if you look at new-to-credit people, fintechs are the ones who are actually making this money - making credit to them. And importantly, the increased credit access, you know - you'd think, okay, you're making these, all these new, very risky loans, default rates are going to be higher. But controlling for risk, if you're making loans with the new technology, it turns out default rates are not higher, right? And so we do see enormous increase in financial inclusion, in that in the sense of private markets actually working to give credit to people who have never had credit before. They were going to money lenders, you know, payday lending, etc., and they are getting now credit, and it is largely coming from fintech.

Amanda Blanco:

This is a major shift that could have an enormous impact on increasing financial inclusion. But what new metrics can lenders use as alternatives to credit scores and histories?

Puri said our "digital footprints" - detailed datapoints on our everyday online activities, like shopping - can be used to gauge our financial status and likeliness to default on a loan with surprising accuracy.

For instance, let's say you visit a popular clothing website to buy a new shirt. That company doesn't just know what you bought, it knows what device you bought it on, who your email provider is, and more.

All of these datapoints can be used by companies and lenders to estimate how financially stable and responsible you are.

Puri said even the time of day that a purchase is made reveals something about the buyer:

Manju Puri:

What time of the day do you make your purchase? Is it morning, noon, or night? And it turns out, people who show up between midnight and 6 a.m. have the highest default rate.

Amanda Blanco:

This information is incredibly useful for credit providers - especially when it comes to applicants without a credit history. Puri explains:

Manju Puri:

So, it turns out that, you know, even people with no credit scores, right, the digital footprint does an equally good job in predicting default. So, this gives us hope, right, that, you know, for financial inclusion, right? That people who have not had access to formal credit markets can actually now access credit markets. It has many implications for financial intermediaries, the business models, the competition. You know, how should regulators behave, firms? You know, they're talked about, possibility of discrimination, but these are all things that we need to certainly think about.

Amanda Blanco:

But giving more people access to more credit comes with risks. And Stephany Kirkpatrick, a fintech founder who now works at a financial services company called Stripe, said education around how to use credit and related financial tools is critical.

Consider earned wage access versus early wage access.

Employers who offer earned wage access allow workers to access money that they've already earned without having to wait until a formal pay period ends.

In contrast, "early" wage access tools can function as loans, sometimes with high interest rates and additional fees. And that can quickly lead to mounting debts. Here's Kirkpatrick:

Stephany Kirkpatrick:

I think it's a really big challenge in America that while we've progressed in so many regards to the ways you can earn money and build a career, we have not progressed deeply in better educating people about financial tools. And it can be easy to fall into a trap where you are potentially spending more than you're earning because you're getting advances on that income to come, and it actually puts you under water.

Amanda Blanco:

It's clear that innovations like AI, instant payments, and enhanced data collection will have a massive effect on how people approach their work and their finances.

And as these technologies continue to evolve, it's critical that industry and government leaders think about the unintended consequences of widespread adoption. Andrew Lo, the MIT professor, said AI has the potential to greatly impact our workforce going forward:

Andrew Lo:

So, it's not just blue-collar workers that are going to be dislocated. We're talking about lawyers, accountants, medical experts, that are going to have to compete with the large language models for advice. So, I think anytime we get excited about a piece of technology, and especially when the technology is really, really broad and powerful, I think we have a responsibility to spend some time studying where the unintended consequences are likely to emerge, and then, from a policy point of view, try to do something about that.

Amanda Blanco:

According to UC Berkley professor Adair Morse, we're at a point where new technology is transforming the global economy - and that could lead to both new opportunities and more drastic inequality:

Adair Morse:

I mean, here's where we are: Where we're at this moment of time, where we have transformed, and we're further transforming into a global economy of data and information. And so, my perspective, you know, I throw up flags and I have concerns, and I do think that, that inequality and those with less data on their file and so forth - that these things are going to worsen. I hope I'm wrong, but I think there's opportunity to get ahead of things. I also think there's opportunity to figure out, you know, to look forward and empower those that don't feel included, both financially and with the economic gains that are coming.

Amanda Blanco:

Mike Rodehorst, the Boston Fed's chief information officer, says the hype about AI is huge - and it's setting an extraordinarily high bar for the technology to clear.

Mike Rodehorst:

We are absolutely at the peak of the hype cycle for a lot of these AI features and capabilities. And the hype is about as big as I've seen it. Again, you can't pick up the newspaper today and not see all over the front page something about AI.

So, the hype is huge, the spending is huge. The capabilities, though, are really starting to take shape and really transform the way that we work. And so, I don't know if we can yet claim that it's lived up to its hype, but it's certainly trending in that direction.

Amanda Blanco:

Rodehorst said that for tech advancements like AI to benefit as many people as possible, leaders and governments must balance supporting innovation with ensuring the security and safety of everyday users.

Mike Rodehorst:

It really is an evolving topic. As we've seen as foundational technologies have come into play in the past, policy regulation often lag behind those capabilities and those advancements. And so, it's really about ensuring that we're educating our population, our users, our leaders about the capabilities of this technology. We're understanding the nuances. We're understanding where there are safety and security risks and where we may need tighter guardrails around how that's used, but how that's done in a way that does not affect, you know, the pace of innovation and how these capabilities evolve in the landscape.

Amanda Blanco:

You can find links to the recording of the 2026 Technology-Enabled Disruption Conference and related materials in the show notes or at bostonfed.org. Subscribe to our mailing list and find interviews and seasons at bostonfed.org/six-hundred-atlantic. And we would greatly appreciate if you'd rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app.

This episode was written by Amanda Blanco and edited by Jay Lindsay, and Nick Brancaleone. Graphics and web design by Christina Eng and Michael Sorokach. Production consultants are Allison Ross and Michael Sorokach. Recording and engineering by Steve Osemwenkhae. Project managers were Nick Brancaleone and Peter Davis.

I'm Amanda Blanco, thanks for listening to Six Hundred Atlantic.