The executive order doesn't single out any specified industry. Instead, it directs the Secretary of Commerce, acting through the director of the Department of Commerce's National Institute of Standards and Technology, to coordinate with the heads of other government agencies such as the Federal Housing Finance Agency, the Consumer Financial Protection Bureau and the Department of Homeland Security on guidelines "for developing and deploying safe, secure and trustworthy AI systems."

The order requires developers of generative AI models to follow agreed-upon procedures for testing the cybersecurity resiliency of the programs. These include ethical hacking drills known as "red team tests," which launch targeted cyberattacks on systems to identify vulnerabilities.

Cybersecurity has been a core supervisory priority among regulators at the National Credit Union Administration for years, as AI grows in popularity. Todd Harper, chairman of the NCUA, recently joined with "federal financial regulators to issue proposed rules for automated valuation models that incorporated fair lending principles," according to his statements at the Defense Credit Union Council's annual conference in August.

"So, while AI can allow credit unions to smartly automate certain functions, like member communication and loan underwriting, it must be harnessed in a responsible way to ensure fairness, transparency and consumer protection," Harper said.

But credit union advocates say that the calls for increased transparency should extend to the regulators as well.

Given how agencies like the Consumer Financial Protection Bureau are employing AI tools, and the lack of communication around their specific uses, increased clarity can help institutions better understand compliance standards, said Andrew Morris, senior counsel for research and policy at the National Association of Federally-Insured Credit Unions.

"Some of the principles around procurement and government transparency around use of AI can be helpful in that regard, and that may shine a light on how an agency like the CFPB is prioritizing its work in the absence of human decision making at every level, which I think is important from a fairness perspective," Morris said.

Morris speculated in his letter to the CFPB in October that the bureau is using AI to analyze its consumer complaint database, but doesn't disclose where and in what capacity such technology is being used.

"The CFPB's potential use of AI and ML techniques to assist supervisory prioritization should not be relegated to the fine print of federal contracts. … Instead, NAFCU asks that the CFPB follow its own advice for financial institutions by ensuring that complex algorithms and models employed by the agency do not operate as black boxes," Morris said in the letter.

Regulators will have to walk a fine line between effective and excessive enforcement as future rules are considered in order to avoid "subjecting [AI] to an exhaustive regulatory review process that almost discourages investment in this area is counterproductive," Morris said.

Fintech experts with the global law firm Linklaters said the executive order's focus on national security is representative of the increasing regulatory scrutiny placed on AI, likening the rapid pace of development to a technological arms race.

"To me, this emerging tech that includes AI [and] digital assets as well, you can look at it in a few different ways. … One of them is that it's a race to the moon, and another one is that it's an arms race," said Joshua Ashley Klayman, U.S. head of fintech and head of blockchain and digital assets for Linklaters. "As you see the executive order, there are a lot of things that align with this."

Financial institutions have continued to adopt AI-powered solutions in recent years, tentatively doing so as policymakers flesh out concerns for all possible use cases of such technology.

Banks "were already taking those steps" to vet third-party vendors and new products as part of that apprehension and existing regulatory framework, because "nobody wants to jump into a program if you can't explain to your regulators or customers" how it draws its conclusions, said Mickey Marshall, assistant vice president and regulatory counsel for the Independent Community Bankers of America.

"Banks are pretty used to things being heavily regulated and already demand a lot from their third-party [partners], because their regulators demand a lot from them," Marshall said.

Other trade groups such as the American Bankers Association have created specialized working groups on AI to help build policy positions. The working groups include bankers from large and small financial institutions.

The working group was formed after a request for information was released earlier this year by the National Telecommunications and Information Administration, which operates under the Department of Commerce to advise the White House on policies in this area.

Banks and credit unions agree that they would like to obtain more clarity from regulators looking for ways to safely bolster the pace of innovation.

Ryan Miller, vice president of innovation policy at the ABA, said Biden's order could potentially signal a more cohesive approach toward oversight of AI at the federal level.

"What our members are hoping for is a more consistent approach across the country rather than what we've seen in some other areas as really a patchwork of state laws that introduce a massive compliance burden at the same time as inconsistent levels of consumer protection," Miller said.