AI may introduce systemic weaknesses into the world of finance, say WEF and Deloitte
Artificial intelligence (AI) may bake systemic weaknesses and risks into the financial system it promises to reshape and automate, said a new report from the World Economic Forum (WEF) and global accounting firm Deloitte.
The report points to the potential for big financial institutions to build machine-learning-based services that live in the cloud and are accessed by other institutions. These could become easy targets for hackers and a single point of systemic failure.
“The dynamics of machine learning create a strong incentive to network the back office,” says the report’s main author, Jesse McWaters, who leads the AI in Financial Services Project at the WEF. “A more networked world is more vulnerable to cybersecurity risks, and it also creates concentration risks,” he added.
This report is a culmination of one year’s research with over 200 interviews with subject matter experts and seven global workshops.
The report reasons that AI will disrupt and change the status quo of the financial industry by allowing early adopters to outsmart competitors. It also hints that consumers will get more sophisticated tools for managing their personal finances and investments using more convenient products from AI.
It also highlights the fact that big tech companies will get an opportunity to enter into finance through partnerships with financial firms, because of their expertise in AI and access to consumer data.
McWaters added that as AI becomes more widely used in finance, it will be important to consider issues like biased algorithms, which can discriminate against certain groups of people.
The report suggests that human skills will always remain important even as automation becomes more widespread and financial companies should not be too eager to lay off their staff.
“AI’s role in financial services is often seen narrowly as driving efficiency through the automation of human effort, but much greater value can be driven through more innovative and transformative applications,” said Rob Galaski, global banking and capital markets consulting leader, Deloitte.