Under new EU regulations, consumers will be guaranteed the right to speak to a human being instead of an AI or automated system when it comes to the purchase of financial products or dealing with customer services from financial institutions. Some regulators are keen to expand the new legislation to cover all consumer services, which would mean that the public would always be guaranteed the right to human-to-human interaction.
Politicians are very keen on this law: when it was transposed onto the Irish statute book last week, they spent several days going on the radio to explain to the public how EU and Irish lawmakers had triumphed over what many citizens consider one of life’s persistent irritations. The law is the avatar of modern European political achievement: a minor annoyance of no great structural significance, dealt with by a single law transferring responsibility for solving the problem onto the private sector.
Imposing Costs on Business to Protect Consumers
But of course, by transferring responsibility onto the private sector, the EU also transfers the costs. Companies that seek to operate in consumer-facing roles across the EU will be required by law to pay for call centers and staff – there is no requirement that these be based in the EU, and many of them will be located in India or other parts of Asia – that their American counterparts simply avoid. Further, the legal requirement to employ humans is not future-proofed, meaning that as AI becomes more and more adept at dealing with queries, EU companies will still be required to use humans.
It is not hard to see how this stance will backfire over time.
There are a few issues to consider.
The first is that, as noted above, this legislation is not especially a matter of preserving human jobs in the EU and warding off artificial intelligence. Already, a considerable proportion of customer-service and call-center jobs have been outsourced to the Indian subcontinent, especially those using the English language.
The second is that the problems with human-led customer-service centers remain: high call volumes mean that there is little to nothing the EU can do to stop every consumer’s nightmare scenario of spending 45 minutes on the phone listening to repetitive hold music while waiting for a human agent to be free to take their query. The EU can mandate that a person has a right to speak to a human agent, but it cannot mandate that a human be available within five minutes of a call being initiated.
The third is that this law comes at a time of unprecedented advances in the capabilities of the very artificial intelligence technology the law seeks to protect against: it is not inconceivable that within a matter of years – perhaps even months – American consumers will begin to find that AI customer chatbots are as pleasant, or even more pleasant, to deal with than humans. And of course, AI chatbots are not limited to one customer at a time, so the 45-minute hold-music scenario does not apply.
The EU's Instinct for Regulation
This, then, is the danger for Europe that is consistently posed by the instinct of Brussels to overregulate and to try to satisfy every consumer whim and complaint: that the net effect in the end is that Europeans end up with a more expensive, less modern, more frustrating experience than their American counterparts. The Americans might suffer through the teething issues with technology, but Washington’s generally more liberal approach to these matters has a tendency to pay off with increased innovation over time. There is a reason why the world’s great tech innovators tend to huddle in the United States, rather than in Strasbourg.
This is the inherent counterproductivity of much of Europe’s thinking on regulation in action. It has three practical effects on the continent’s population and economy.
First, it imposes stagnation and calls it progress. The instinct to regulate in this area, for example, is dressed up in the clothes of consumer choice and consumer protection, but actually stifles consumer choice and in the long term imposes higher costs. Companies that develop the very best AI systems will only invest in doing so if at the same time they can save on the cost of call centers. Since Brussels now bans that, there is little reason to invest or to offer EU consumers the kind of choice that Americans have.
Second, it encapsulates the problem with EU lawmaking, which is so often about telling companies what they can do and so very rarely about freeing up innovators to try new things. There is something in the Brussels psyche that views all innovation with suspicion and most private enterprise as inherently untrustworthy – an instinct that everything businesses do to reduce their costs is aimed at ripping off consumers rather than helping them. This is perhaps the biggest difference between EU and American culture: in the latter, private business is viewed as an engine of innovation, but too often in the former it is viewed as an activity for the greedy whose profits are proof of its inherent immorality.
Third and finally, it is an example of misguided regulation on its own terms: the EU could and arguably should be fostering innovation by issuing targeted regulation aimed at decreasing waiting times for customer problem resolution. Such an approach would encourage companies to invest in solutions, rather than preserving legacy systems and all of their problems indefinitely. But this might require thought and engagement with private business. And sadly, that is not the culture in Brussels.