The importance of ethical AI in financial services

by Clara Durodié, Cognitive Finance Group

Artificial intelligence (AI) impacts the fabric of the financial services industry. Those companies which understand this paradigm shift are already making provisions to become AI-driven companies, otherwise known as technology companies operating in the financial sector. In their quest to become AI companies, they have to change how they operate and stay profitable - their operational model, revenue model, and business process redesign. One of the first steps towards companies’ technologydriven futures, is to ensure that their business processes are redesigned to enable humans and machines to work together. When business processes are designed correctly, they enable scaling AI across the enterprise with a high success rate. Business process design is also essential because it allows embedding ethical values into AI models right from the beginning. In other words, ethical AI is all about design and a robust approach to delivering business value in a way that is compatible with a technology-driven industry.

HOW SHOULD BUSINESS LEADERS BE APPROACHING ETHICAL AI?

AI is a strategic business tool for growth, profitability, and improved customer service. However, as there’s limited governance around AI, regulators are working hard to build guidance frameworks for its adoption. In the meantime, institutions need to lead by adding to their board of directors an AI ethicist with specific industry experience. Ethical AI is modern corporate governance and improved governance of technology: it is not compliance. I would argue that it is good business as it is grounded in sound business models deployed with technology designed to follow the principles of fairness, privacy, transparency, explainability and accountability. The opposite of ethical AI is ungoverned and unethical AI, which automates wrong decisions and puts businesses at risk, escalating new types of risks very quickly.

Ethical AI is all about design and a robust approach to delivering business value in a way that is compatible with a technology-driven industry.

Using an analogy contemporary to the Covid-19 pandemic, unethical AI is like a virus; it spreads very quickly and is hard to contain. The damage is long term, sometimes unknown, and not immediately quantifiable. Bias is one of the most prominent concerns. For instance, a biased dataset in insurance, translates into a biased AI model with biased insurance decisions. These lead to errors, erosion of customers’ trust - which affect a company’s reputation - and its market share. It makes no sense to deploy technology which is unfair, insufficiently tested and reliant on biased data. The effects could be privacy breach, lack of transparency, explainability and accountability.

THE FUTURE OF AI IN FINANCIAL SERVICES

For the first time in the history of our sector, we have the opportunity to deliver personalisation at scale. This can eradicate financial advice gaps, for instance, and help people manage and grow their wealth more efficiently. When properly designed, deployed and maintained, AI technologies open new possibilities for business growth and profitability. One of these possibilities is personalisation at scale to delight customers and provide improved services.