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The OECD Business and Finance Outlook 2021
says that investment in AI finance is on the rise. The financial and
insurance sector has consistently been within the top 10 industries in
terms of the amount of VC investments in AI start-ups, investing over
USD 4 billion worldwide in 2020. Almost 65% of VC investments in the
sector went to American AI start-ups.
As AI applications become increasingly integrated into
business and finance, the use of trustworthy AI will become increasingly
important for ensuring trustworthy financial markets, says the report.
AI has the potential to facilitate transactions, enhance
market efficiency, reinforce financial stability, promote greater
financial inclusion and improve customer experience. But AI also raises
unique challenges to privacy, autonomy, transparency and accountability,
which are particularly complex in the financial sector, according to
the Outlook.
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 key to managing risk as determinants of trustworthy
AI. Failing to foster these qualities in AI systems could lead to the
introduction of biases generating discriminatory and unfair results,
market convergence and herding behaviour or the concentration of markets
by dominant players, which can all undermine market integrity and
stability.
Existing financial regulations may fall short of
addressing systemic risks presented by wide-scale adoption of AI-based
FinTech by financial firms, says the report.
These conditions have led to a critical juncture for the
deployment of AI applications in business and finance, according to the
Oulook. Financial regulators are grappling with whether and how to
adapt existing rules, or create new ones, to keep pace with
technological advances in AI applications, while striking the right
balance between managing risks and supporting innovation.