Banks using artificial intelligence (AI) to approve loan applications have been warned by UK financial regulators that they can only deploy the technology if they can show it will not discriminate against minorities, reports the Financial Times on Sunday 13 February.
Minorities are already struggling to borrow in the state, and watchdogs have become tougher on Britain’s biggest banks over how they will tackle AI issues.
Going digital has major banks looking for different ways to automate lending, including using AI and more advanced algorithms, to determine who to lend to based on data, zip codes, job profiles, etc
Banks have used machine learning (ML) techniques to make lending decisions, which they say could reduce racial discrimination. AI, in their view, would not make “subjective and unfair” judgments, according to the report.
That said, regulators and campaign groups have a different view, saying using AI for credit models might actually do more harm.
“If someone is part of a group that has already been discriminated against, they will tend to often live in a postcode where there are other (similar) people…but living in that postcode doesn’t make you more or less likely to default on your loan,” said Sara Williams of Debt Camel, a personal finance blog. “The more you spread big data, the more you search for data that isn’t directly relevant to the person. there is a real risk of perpetuating stereotypes here.
PYMNTS wrote recently that new digital technologies, while having many improvements, have also opened a new box of worms of privacy issues – especially for Americans.
See also: US must learn from Europe on AI privacy and regulation, says policy expert
According to the report, only three US states – California, Virginia and Colorado – have passed comprehensive consumer data privacy laws.
Marc Rotenberg, president and founder of the Center for AI and Digital Policy, also said AI problems could cost businesses dearly.
“We have a lot of work to do,” he said. “Unlike almost every modern nation in the world, the United States does not have a comprehensive federal privacy law. We don’t even have a privacy agency.