The Organization for Economic Co-operation and Development (OECD) has stated that the governments, financial regulators, and companies should collaborate more to overcome the problems of developing and deploying trustworthy artificial intelligence (AI) in the financial industry.
The finance and insurance industry has regularly been among the top ten industries in terms of venture capital (VI) investments in AI startups, with over $4 billion invested globally in 2020, the OECD Business and Finance Outlook 2021 says.
The usage of trustworthy AI will become increasingly vital for guaranteeing reliable financial markets as AI applications grow more integrated into business and finance.
AI has the potential to improve transactional efficiency, market efficiency, financial stability, financial inclusion, and consumer experience. However, AI has unique issues in terms of privacy, autonomy, transparency, and responsibility, which are particularly problematic in the financial sector, according to the report.
The OECD noted that, “Critically, increasingly complex AI algorithms that are difficult, or even impossible, to explain could amplify existing risks in financial markets or give rise to new risks.”
Transparency, fairness, data governance, and accountability are critical determinants of trustworthy AI risk management. “Failing to foster these qualities in AI systems could lead to the introduction of biases generating discriminatory and unfair results, market convergence and herding behavior or the concentration of markets by dominant players, which can all undermine market integrity and stability,” as per the report.
Existing financial regulations may fall short of addressing systemic risks presented by the wide-scale adoption of AI-based FinTech by financial firms. “AI uptake in a highly regulated sector such as finance could benefit from a policy environment that is flexible enough to keep up with technological and business model developments and promote innovation, yet remains safe and provides legal certainty,” OECD added.
The OECD AI Principles, which were adopted in May 2019, become the first international guideline for the responsible management of trustworthy AI.