India’s central bank chief warns against using AI in financial services.
Reserve Bank of India Governor Shaktikanta Das said on Monday (October 14) that the increased use of artificial intelligence (AI) and machine learning in the financial world can trigger stability risks, requiring appropriate risk mitigation practices from banks. banks.
“The heavy reliance on AI can lead to concentration risks, especially when a small number of technology providers dominate the market,” said Das, whose comments at an event in New Delhi were the following: reported by Reuters.
He added that this could exacerbate systemic risks, as failures or disruptions in these systems could ripple through the financial sector as a whole.
As Reuters notes, financial services companies in India, like their counterparts around the world, are turning to AI to improve customer experiences, reduce costs, manage risks and fuel growth through things like chatbots and personalized bank.
Das said the increased use of AI presents new vulnerabilities such as increased risk of cyberattacks and data breaches. He also warned that the “opacity” of AI makes it difficult to scrutinize the algorithms that help lenders make decisions and could potentially lead to “unforeseeable market consequences.”
His comments echo those the US Treasury Department released earlier this year on the possibility of AI-based fraud.
A Treasury study found a “troubling lack of fraud prevention data sharing, further disadvantaging small financial institutions,” as PYMNTS writes.
Limited data hampers their ability to build effective defenses against AI fraud, while large institutions leverage huge reserves of data for model training.
Narayana PappuCEO of Zendataa data security and privacy compliance solutions company, told PYMNTS in an interview that the biggest barrier for small financial institutions in using AI for fraud detection is not the building models but quality and standardized fraud data, adding that financial institutions can serve as a node to aggregate the data.
All of this is happening at a time when, as PYMNTS wrote last week, AI is reshape finance. PwC predicts efficiency gains in banking, FINOS launches AI governance framework, and Devexperts introduces AI-powered trading on Discord.
“These advances highlight the influence of AI on financial services, from strengthening security and streamlining operations to improving user access and resolving governance issues,” it said. report.
