AI in Banks Can Worsen Social Inequalities, Expert Warns

An expert has raised concerns about integrating artificial intelligence (AI) into banking systems, saying it can exacerbate social inequalities.

As individuals engage with various banking services, they unknowingly leave behind a trail of data that can be leveraged to shape their experiences.

While this data can be beneficial when used appropriately, there are growing concerns about its misuse, particularly in the context of AI-driven decision-making.

Implications of AI in Banking

Elisabeth Austad Asser, who recently completed her doctoral dissertation at the University of Agder (UiA), has delved into the implications of AI in banking, particularly about the values of institutions like Sparebanken Sør, where she is involved in sustainability efforts.

Her research sheds light on how AI can categorize individuals and restrict their choices without their awareness, potentially leading to discriminatory outcomes.

"It is dangerous when everything is turned into data. Once you have been defined into a category, this can be further utilized by new algorithms. If banks mishandle this, they may contribute to reinforcing social inequalities. And in the worst case, exacerbating them," Asser said in a statement.

"A savings bank carries a historical responsibility towards the local community. It should not just succumb to the pursuit of efficiency created by technology," she added.

In her dissertation, Asser outlined 13 recommendations to help banks utilize AI while remaining aligned with their values. These recommendations emphasized the importance of developing a clear plan for AI implementation, understanding relevant laws and regulations, prioritizing data quality, addressing biases, and involving diverse teams in algorithm development.

Will AI Worsen Social Inequalities?

One of Asser's key concerns was the potential for AI to perpetuate existing social inequalities. Banks may inadvertently reinforce biases and discrimination against marginalized communities by relying on algorithms to make decisions.

Factors such as location, gender, or socioeconomic status could influence individuals' access to financial services, further widening the gap between the privileged and the marginalized. This issue is particularly relevant for savings banks that have a historical obligation to promote economic stability and serve their local communities.

However, according to Asser, the pressure to adopt new technologies and remain competitive in the banking sector poses a challenge to these institutions. While AI offers opportunities for efficiency and profitability, it also requires careful consideration of its societal impact and ethical implications.

Asser emphasized the need for banks to approach AI with mindfulness and transparency, ensuring that algorithms' decisions are fair, accountable, and aligned with the bank's values. That includes fostering internal expertise, educating employees about biases, and establishing mechanisms for monitoring and auditing AI systems.

"The technology that impacts and shapes us is being adopted very rapidly now. We need to understand this technology to ensure that the way we use it is sustainable and contributes to creating a world in which we all can and want to live," Asser noted.

The study's findings can be found here.