How to implement ethical AI in financial services
By Matt Peake, Global Director of Public Policy at Onfido
From unlocking smartphones to accessing online applications and opening bank accounts, biometric technology has quickly become part of our day-to-day lives. With research showing that 80% of people find biometrics both secure and convenient, it’s no surprise that we are seeing widespread adoption across financial services.
Biometric verification is powered by artificial intelligence (AI) systems which have been trained with sophisticated data models to quickly and accurately recognise, categorise and classify facial images. But with 68% of large companies in the UK having adopted at least one AI application, it is crucial that the technology continues to be implemented correctly – otherwise, it can have serious consequences for real people.
This means that in industries like financial services, where banks and payment service providers play a key role in financial inclusion and building trust within communities, AI has to be subject to ethical parameters. In fact, there are six key considerations that the industry must pay attention to when building ethical AI: fairness and bias, trust and transparency, privacy, accountability, security, and social benefit.
Failure to address any of these can have serious consequences for customers and businesses alike. This includes financial exclusion, obstacles to accessing global markets, and non-compliance to existing and upcoming regulations. That’s why passing the responsibility to engineering, compliance or legal teams or even ignoring the issue is no longer an option. Financial services leaders, within all departments, must take an active role in the performance of AI in their applications.
The importance of ethical AI
AI is used across multiple functions of finance – from fraud detection and risk management to credit ratings, and so plays an essential part in the processes that underpin everyday life. If AI is not ethical, it damages trust in the system and erodes the value of financial services.
When issues with automation arise, human intervention is often the solution. But a manual fallback isn’t always the best answer as humans are prone to systemic bias. It is commonly understood that bias exists in systems seeking to distinguish faces of people from ethnically diverse backgrounds. This can lead to the development of non-optimal products, increased difficulty expanding to global markets, and an inability to comply with regulatory standards.
Where discrimination occurs, the consequences can be severe and include alienation from essential services. This is why Onfido takes a proactive stance to reduce bias, having published guidance based on defining, measuring, and mitigating biometric bias, and also participated in the UK’s Information Commissioner’s Office sandbox to pioneer research into data protection concerns associated with AI bias published its report.
Elsewhere, ethical AI is at the heart of regulation. The UK’s AI Governance regulations and the EU’s AI Act outline how trust should be at the centre of how businesses develop and use AI. Not only will it be a requirement for financial services to follow the considerations of ethical AI, but it will be central to future growth. There is also an ongoing requirement for compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, holding financial institutions accountable for how they verify customers’ identities. With an investment in ethical AI, financial services will improve the accuracy and reliability of their KYC processes and reduce false acceptance and rejection acceptance rates across the board.
Successfully tackling ethical AI
There’s no doubt that ethical AI is an evolving challenge that requires financial services to stay on top of their applications as new use cases emerge, and deployment grows.
Developing and deploying ethical AI should be a company-wide initiative. It requires a top-down commitment to ensure ethical practices are embedded into every stage of application development and implementation. Such an approach is necessary to keep up with the challenges of developing and maintaining ethical AI. To achieve optimal outcomes, businesses must bring teams together to identify problems, define and formulate solutions, implement them, and track and monitor their progress.
Executive teams must understand the risks of developing AI that is not ethical and the long-term financial and reputational repercussions it could have. But they must also recognise that ethical AI is the gateway to innovation, driving accurate and efficient financial services that can lead to positive social outcomes – for the benefit of all customers, no matter who or where they are.
The impact of ethical AI
Following the six considerations of ethics will not only help financial service providers meet their regulatory obligations but will also help to build fair, transparent, and secure systems. It also highlights their ongoing commitment to safeguarding their customers.
However, failure to do so may result in long-term issues. It can lead to products and services that discriminate against customers and ultimately lack regulatory compliance. Therefore, keeping ethical considerations front of mind during each stage of AI development and implementation will ensure that customers are treated fairly and, in the long-term, will protect and improve brand reputation, building trust and loyalty. It’s a worthwhile goal that creates a better world for everyone – both in terms of the performance of AI systems and the impact of building them.
Efficient Ways Construction Firms Can Bring Down Costs In 2023
Consistent, high-quality construction projects being underway is often a sign of a thriving economy. The future of the US is assured when new infrastructure and homes are under constant development.
As has been well-documented already, construction isn’t as productive as it could be in the US today. Numerous factors are causing these types of projects to be stalled and subsequent price hikes to occur. Economic and sector-wide conditions could be far better.
That said, it’s important for construction firms to feel like they have some say in their future. While things aren’t ideal, there’s plenty these entities can be doing that can bring down costs for the remainder of the year.
We’re a good way into 2023 now, but bringing down costs is not work that can be postponed to 2024. So, here are some efficient ways construction firms can do just that in 2023.
Review Fleet Logistics
It might seem like a curious place to start, but it’s a good idea to review how you utilize your fleet if you have one. The operational costs can sometimes be underestimated, and mismanagement in this area can be more costly today for firms in any sector.
Some companies bring their fleet management costs down by optimizing the routes they travel. Others will run tighter maintenance programs to avoid damaging repair costs in future. Some firms will rent out their vehicles, too, rather than purchasing them outright. Drivers may be subject to refresher training courses, ensuring they adhere to their employer’s money-saving policies.
Then there’s the matter of going green, which more companies are turning their attention to. For example, PepsiCo Vice President, Mike O’Connell, stated at the end of last year that, despite hefty costs around the infrastructural changes, his company believed that “the operating costs over time will pay back” to make the arrangement worthwhile in the long run. That sentiment applies to construction firms as well.
There’s also fleet management software to consider. These digital tools can be encrypted on a cloud server and give all users insights into things like fuel usage, the condition of the cars, and the routes travelled. More intricate oversights can be gleaned from fleet usage, and associated costs can be tallied up instantly. Consequently, construction firms would do well to get that installed.
Install Management Software for Construction
Sticking with software ideas for a while longer, construction management software can come with an onslaught of cost-saving advantages for a construction firm. It’s a principle similar to fleet management software in that more detailed real-time analytics can lead to strategy adjustments.
Cost change management can be streamlined with the use of these tools. Project team communication can also be simplified, which leads to time and money being saved all the more. There’s often a modern and intuitive AI to make these systems operational in days, too, which means construction firms can quickly adapt.
Firms like Kahua are often the obvious choice for these solutions. Their cloud-based project management software in construction has been fine-tuned to be tailored perfectly to a firm’s needs. A flexible approach can be undertaken when utilizing it, and firms can be confident that both their present and future business processes can be more carefully managed.
Create Stronger Supplier Links
Suppliers are the lifeblood of any construction business. It’s possible to work more closely with them.
At the end of 2022, Forbes reported that inflation and supply chain disruptions made getting the necessary construction materials more costly and time and consuming today. Their recommended solutions included rather expected budget control measures, but more notably, fostering stronger supplier relations. That way, construction firms can better understand the factors leading to surging material costs.
It may also be better for construction firms to work with local suppliers where possible. That way, they have a better chance of establishing common ground, supporting the local economy and perhaps having more mutual connections in the industry. Delivery costs can also be slashed along with emissions, which are factors that also contribute to a more robust working relationship.
Outsource Where Possible
Construction firms can depend on more than their suppliers to bring costs down. Further help is available.
Such support is usually accessed via outsourcing. Opportunities to do this may involve:
- Outsourcing waste management – some of these firms may pay closer attention to the potential of recycling and reusing materials, creating further cost savings.
- Outsourcing IT infrastructure – Construction firms have sensitive data they need to protect like any other company and are becoming more digitized like their peers too.
- Outsourcing to off-site construction firms – These entities will design and assemble building components away from the area they’ll be used. They’re often pitted against onsite firms, but both can be required for large-scale development projects.
Outsourcing can reduce costs in the long run, but it isn’t an answer to every struggle. Construction firms must continue doing many things for themselves – even monitoring the weather to ensure potential storms won’t cause hazardous work conditions or delays. That self-starter spirit that often drives construction firms should never be lost.
Top banking trends of 2023 and global outlook of banking and fintech for the year ahead
Author: Professor Marco Mongiello, Pro Vice-Chancellor, The University of Law Business School
You’d be forgiven for assuming that the global outlook for banking and fintech will be dominated by the usual suspects:
Artificial Intelligence – AI plays an increasingly prominent role in banking and fintech by enabling personalised services, fraud detection, predictive analytics, use of chatbots and robo-advisors.
Blockchain and Cryptocurrency – the secure, decentralised and swift system for financial transactions that blockchain has brought to the fore a few years ago, is now becoming ubiquitous. An increasing number of transactions are recorded through blockchains technology, primarily in the cryptocurrency market.
Digital Banking and fintech – accelerated by COVID-19 pandemic, the adoption of digital banking is a trend that will persist as customers have become accustomed to the convenience and efficiency of digital banking. Moreover, fintech enables access to financial services for previously underserved populations in developing countries or less affluent social groups in more affluent societies. This includes mobile banking services, peer-to-peer lending platforms, and microfinance solutions.
Open Banking – another global trend is the use of open APIs (Application Programming Interfaces) that allow third-party developers to build apps to facilitate customers’ access to financial data and services from banks.
Nonetheless, the challenges posed by these rapid changes are reminders that banking, an industry that by its very nature needs to be conservative, risk averse and solid, wobbles on the unchartered grounds of fast and turbulent innovation, where entrepreneurship instead thrives. The underlying rationales of banking and fast digital innovation are not incompatible but do need solid operations and thought-through decision-making to avoid causing catastrophic collapses.
The recent examples of Silicon Valley Bank, Silvergate, FTX and Wirecard are stark reminders that digital entrepreneurship applied to banking doesn’t just bring to customers the visible transformation of valuable new services, but also dents (perhaps as an unexpected consequence) the rationale itself of the role of banks in the global economy. Moreover, the central banks’ ability to contain the effects of single banks’ defaults is no longer a certainty, as experienced just over a decade ago and more recently. The markets’ sentiments are hardly reassured by the commitments of even the most coveted players, such as the European Central Bank, the Federal Reserve, and the President of the United States himself.
Regulators are lagging behind and their attempts to catch up may cause further seismic shocks to the global banking system. For example, another trend that is emerging is one of artificial intelligence decision-centres (i.e., decentralised offices of banks which take autonomous decisions on behalf of investors) outside the most stringent regulatory environments, enabling banks to operate globally more efficiently and more competitively. And we can expect that regulators will close the gap either abruptly, as it is currently happening in China, where private banks are subject to an escalation of regulatory and monitoring restrictions, or more gradually as it is happening in Europe and in the US.
The questions we face, as individual or trade customers of our high street banks, as direct investors or clients of managed funds, are whether banking will become more user-friendly yet, for our daily use but riskier, too, or is it simply becoming more efficient, transparent and also safer.
I’m afraid that the answer is by no means an obvious one. Therefore, caution, level-headed decision- making and critical thinking have never been as important as these days. Whether you are looking after your family savings or growing your pension reserve, the imperative is that you keep updated about the providers of the financial services you rely upon as well as about the general regulations that apply to your financial transactions. This is where, for example, you need to be familiar with your rights in case of cyber fraud, as well as learning how to minimise the risk of becoming a victim thereof. Also, taking additional steps to evaluate the credibility, solidity and reliability of the online provider of that app that was recommended by a trusted friend, may prove a very good move.
Similarly, whether you are the CFO of a medium or large company, or are a sole trader wrestling with your own business’s finances, you need to reflect on what you really want from your bank in the first place. That is before you started to be swayed by the whirlpool of offers of ‘opportunities’ to multiply your financial investments. Chances are that your initial approach to your bank was dictated by either a need for financing your working capital, as per your budget and strategic plans, or to find a safe place for your temporarily idle liquidity. Perhaps you were also after some basic treasury services such as swift payments and debt collection. Maybe some other financial services closely related to your business operations, e.g. factoring. The advice is to give very careful consideration to services that are more remote from your business, because the trend for the next years is that more and more of those will be offered to you. But many new services will disappoint those who, sadly, cannot afford financial mishaps as they look to run and grow their business.
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