World Economic Forum creates 'guard rails' for AI adoption

Artificial intelligence technology will "create a fundamentally different kind of financial system", says the World Economic Forum, which is flagging big challenges for banks to explain, to customers and regulators, how decisions are being made by systems designed to evolve autonomously. AI will create new vulnerabilities for financial stability stemming from its interconnectedness and the herding instincts of algorithms, which could exacerbate crises, the forum suggests. It points to algorithms "destabilising competition" and possible blowback for banks given the technology could introduce unfair biases, propagating financial disadvantage, and erode human banking skills. But at the same time the forum is guiding financial services players on how to implement AI, which it says could ultimately improve the delivery of financial services to customers. A core focus should be policies to explain how decisions are made. "The enormous complexity of some AI systems makes it difficult to obtain an interpretable explanation for why the system has produced a given output," the report says.