There is no doubt that Artificial Intelligence (AI) is reshaping the financial industry, but this only happens with the risks associated. Some of the key concerns are
- Data Privacy: There is a massive amount of sensitive financial data that is used by AI. This could be a prime target for cyberattacks and data breaches.
- Bias and Fairness: The AI algorithms can have biases in the historical data, which may lead to unfair outcomes in the spaces of lending, etc.
- Regulatory Compliance: The AI models are advanced but may need to be made aware of all the recent compliance changes. This is a complexity that they need to address.
- Lack of Transparency: Some of the AI models have black box features that complex the human understanding of the logic behind certain outputs. This could be in areas of compliance, accounting, etc.
- Operational Risk: AI is dependent on the internet and its learnings, which may result in errors, leading to an impact on operations resulting in financial consequences.
- Job Displacement: The AI is the talk of the town even for the jobs that it will replace. This is a risk for the humans involved in the market.
Although there is a lot of potential for artificial intelligence in the financial markets, one has to keep in mind these risks to use it to its full potential.
