AI benefits come with threats insurers and risk managers warned

Financial services firms have been warned that the benefits of greater use of artificial intelligence (AI) will come with threats, that have to be addressed.

A team at the Alan Turning Institute in Oxford have released a new study, “AI in Financial Services” which explores the use AI and the importance of responsible innovation in the financial services sector.

The report was commissioned by the Financial Conduct Authority (FCA) as part of The Alan Turing Institute’s public policy programme collaboration with the FCA and has been launched at the accompanying CogX session.

The authors said they hoped the report will provide stakeholders in the sector with the understanding needed to navigate the evolving AI landscape in pursuit of responsible and socially beneficial innovation.

“Artificial intelligence (AI) plays a central role in current processes of technological change in financial services. Its prominent place on innovation agendas speaks to the significant benefits that AI technologies can enable for firms, consumers, and markets,” said the report. “At the same time, AI systems have the potential to cause significant harm. In light of this fact, recent years have seen a growing recognition of the importance of AI adoption being guided by considerations of responsible innovation.

“The aim of this report is to inform and advance the debate about responsible AI in the context of financial services. It provides an introduction to relevant technological concepts, discusses general challenges and guiding principles for the adoption of AI, maps out potential benefits and harms associated with the use of AI in financial services, and examines the fundamental role of AI transparency in pursuing responsible innovation.”

The report is divided into four key sections:

Introduction to AI. It explains central technological concepts and highlights the relationship between them.

General challenges and guiding principles for responsible AI adoption. Provides the foundation for understanding how AI-related risks arise and the role of AI ethics principles in guiding responsible innovation.

Potential benefits and harms in financial services. The section considers the positive and negative impacts that different uses of AI in financial services could have in the areas of consumer protection, financial crime, competition, the stability of firms and markets, and cybersecurity.

AI transparency and its importance for responsible innovation. It examines the different forms of transparency, underlining the foundational role of AI transparency in ensuring and demonstrating that AI systems are trustworthy and used responsibly.

The authors of the report, Dr Florian Ostmann and Dr Cosmina Dorobantu, from The Alan Turing Institute’s public policy programme, said: “The use of AI in financial services ushers in promises of beneficial technological innovations as well as threats of harmful impacts. We hope that this report will help advance the debate on responsible AI in financial services by providing a comprehensive conceptual framework for examining the challenges and risks that AI technologies pose and defining expectations about AI transparency in this sector.”