Artificial intelligence (AI) has the potential to revolutionize the finance industry in 2023 and beyond. The impact of AI on financial systems was explored at the 2023 ASIC Annual Forum in Melbourne. This article highlights the key points discussed during the session.
Leveraging AI for Good Outcomes
AI can be used to leverage positive outcomes for consumers in the finance industry. Machine-learning models, robo-advice, and scam prevention are some of the areas where AI can be beneficial. However, it is important to note that each new opportunity also carries risks.
Monitoring the Development of AI
ASIC, the Australian Securities and Investments Commission, is closely monitoring the development and application of AI in the finance industry. The aim is to better understand the threats and opportunities for regulated entities and markets. This monitoring is essential to ensure the safety and integrity of the financial ecosystem.
The Power of AI in Boosting Productivity
AI has the power to supercharge Australia’s productivity. Advances in AI are driving predictions, decision-making, and recommendations across various organizations, including financial services and markets. Nick Abrahams, a futurist and global leader in digital transformation, emphasized the potential of generative AI systems like ChatGPT. While some organizations may be reluctant to adopt such systems, they are seeping in through third-party vendors. The productivity impact of generative AI on knowledge workers is estimated to be between 35% and 50%, surpassing the impact of steam during the Industrial Revolution.
Benefits of Widespread AI Implementation
Widespread implementation of AI can bring benefits for both consumers and businesses in the finance industry. For example, Elula, an Australian software company, works with more than 20 banks to provide a machine learning product that predicts customer behavior and improves customer retention. This type of AI implementation can be highly valuable for banks and their customers.
Risks and Challenges of AI
While AI offers many opportunities, it also presents risks and challenges. Algorithms can cause consumer harm, as evidenced by ASIC’s recent action against IAG. The variable quality of AI decisions poses a risk for organizations, especially when the use of AI is not properly documented. Professor Nicholas Davis, an industry professor of emerging technology, highlighted the importance of addressing these challenges. He emphasized that organizations need to be able to identify where AI is being used in their systems and be prepared to explain the decisions made by AI algorithms.
The Future of AI in Finance
ASIC is actively monitoring how AI is impacting the safety and integrity of the financial ecosystem. The risks to consumers, investors, and overall market integrity are a key strategic priority for ASIC. The responsible and ethical use of emerging technologies, including AI, is essential for all participants in the financial system. ASIC is exploring the potential uses of AI and other technologies to remain a digitally enabled, data-informed regulator. The promotion of ethical use of consumer data and AI is also a priority for ASIC.
Critical Considerations for AI Adoption
In light of the potential risks and challenges associated with AI, there is a need for minimum standards in its use. This is particularly important in cases where there could be bias or discrimination. Nick Abrahams emphasized that while AI has the capability to do great good, it also has the potential to cause great harm. Organizations need to carefully consider how they will use AI and ensure that it is explainable, especially in cases where decisions may have significant consequences.
Conclusion
AI has the potential to transform the finance industry in 2023 and beyond. It can improve productivity, drive predictions and recommendations, and benefit both consumers and businesses. However, the adoption of AI must be approached with caution, considering the risks and challenges it presents. ASIC is actively monitoring the development and application of AI to ensure the safety and integrity of the financial ecosystem. The responsible and ethical use of AI is crucial for the future of the finance industry.