Turns out the financial sector is okay with regulation, but only for AI
In addition to being generally discriminatory and possibly automating murder, artificial intelligence technology could destabilize the financial system and make it significantly more vulnerable to attacks, as per a new report released World Economic Forum (WEF) on Wednesday.
With assistance from consulting firm Deloitte, WEF researchers conducted over 200 interviews with experts in the field and held numerous global workshops over the course of one year to determine the most likely effect of the finance sector’s increased reliance on AI technology, which is currently used to automate application and decisions processes, aid in investments, and do risk assessment, among many other tasks.
The findings were grim: While AI has the ability to “radically increase the accuracy, timeliness, and performance” of many technical aspects of the finance industry, it also poses a big cybersecurity risk and will incentivize partnerships with big tech as companies pivot to cloud computing.
“Big financial institutions are taking a page from the AI book of big tech: They develop AI applications and make them available as a ‘service’ through the cloud,” said lead author of the study Jesse McWaters in a statement. “The dynamics of machine learning create a strong incentive to network the back office. A more networked world is more vulnerable to cybersecurity risks, and it also creates concentration risks,” said McWaters.
And you thought your banking app was bad.
The unbalanced nature of global data regulations may also affect the concentration of financial (and non-financial) institutional power. While the European Union has a comprehensive set of restrictions regarding the collection and processing of consumer data, the U.S., China, and most other areas do not, which could lead more companies to base their operations in America and outside of the EU.
AI and machine-learning based technologies also have a number of issues we haven’t worked out yet, and are prone to discrimination putting minorities and other marginalized groups at a disadvantage.
The report cites consumer protection and human capital as two important things for regulators to consider going forward. “ As AI automates decision-making processes, new methods of protecting consumers and ensuring the public interest is sheltered will be required,” says the report. “As AI creates new forms of labour needs and displaces portions of the labour force, collective action by institutions and regulators will be required.”