The AI Revolution: Opportunities and Challenges for the Finance Sector

by   Carsten Maple, et al.

This report examines Artificial Intelligence (AI) in the financial sector, outlining its potential to revolutionise the industry and identify its challenges. It underscores the criticality of a well-rounded understanding of AI, its capabilities, and its implications to effectively leverage its potential while mitigating associated risks. The potential of AI potential extends from augmenting existing operations to paving the way for novel applications in the finance sector. The application of AI in the financial sector is transforming the industry. Its use spans areas from customer service enhancements, fraud detection, and risk management to credit assessments and high-frequency trading. However, along with these benefits, AI also presents several challenges. These include issues related to transparency, interpretability, fairness, accountability, and trustworthiness. The use of AI in the financial sector further raises critical questions about data privacy and security. A further issue identified in this report is the systemic risk that AI can introduce to the financial sector. Being prone to errors, AI can exacerbate existing systemic risks, potentially leading to financial crises. Regulation is crucial to harnessing the benefits of AI while mitigating its potential risks. Despite the global recognition of this need, there remains a lack of clear guidelines or legislation for AI use in finance. This report discusses key principles that could guide the formation of effective AI regulation in the financial sector, including the need for a risk-based approach, the inclusion of ethical considerations, and the importance of maintaining a balance between innovation and consumer protection. The report provides recommendations for academia, the finance industry, and regulators.


QB4AIRA: A Question Bank for AI Risk Assessment

The rapid advancement of Artificial Intelligence (AI), exemplified by Ch...

Towards Self-Regulating AI: Challenges and Opportunities of AI Model Governance in Financial Services

AI systems have found a wide range of application areas in financial ser...

AI reputational risk management

The benefits of AI are many. It can help tackle climate change, strength...

AI Challenges for Society and Ethics

Artificial intelligence is already being applied in and impacting many i...

AI and Core Electoral Processes: Mapping the Horizons

Significant enthusiasm around AI uptake has been witnessed across societ...

Know Your Customer: Balancing Innovation and Regulation for Financial Inclusion

Financial inclusion depends on providing adjusted services for citizens ...

Reporting on Decision-Making Algorithms and some Related Ethical Questions

Companies report on their financial performance for decades. More recent...

Please sign up or login with your details

Forgot password? Click here to reset