UK financial regulators have warned banks to consider using artificial intelligence.
This comes after concerns that the AI might pick up ethnic discrimination. It is common knowledge as minorities are having a tough time getting their bank loan applications approved.
Thereby, the banks can use AI technology, only if they can prove that it won’t discriminate against minorities.
Observers and regulatory authorities are pressing Britain’s largest banks.
High-street banks in the UK are looking into ways to automate more of their lending.
This includes the use of artificial intelligence (AI) and more advanced algorithms. This will help to decide who to lend to based on historical data, on different types of borrowers.
UK Banks believe that using machine learning techniques to make loaning decisions will reduce discrimination.
Cultural groups have historically struggled to obtain affordable loans. AI would not make the same biased and unfair decisions that humans do.
“The banks would like to get rid of the human decision-maker because they perceive, I believe correctly, that that is the main source of bias,” said Clifford Chance lawyer Simon Gleeson.
However, regulators are concerned that the use of AI in credit models will have the opposite effect.
In the past, there have been cases where data caused a problem.
Hence, making them even more likely to default. Using AI can make this even worse
Last year, the chairs of two US congressional committees urged UK regulators to ensure that the country’s largest lenders applied safeguards.
Recently, the EU’s financial regulators asked lawmakers to consider further analyzing the use of data.
An old government review has come to light.
However, UK banks are lending less to ethnic minorities.
In order to prevent AI-led lending from being misused. UK regulators are focusing on issues such as built-in safeguards.