The rise of AAAI: How a data ethics framework drives value

  • Leanne Allen, Director |

4 min read

The COVID-19 crisis has fast-tracked innovation plans and the use of AAAI to tackle immediate challenges in financial services – for example, we’ve seen chatbots introduced to replace in-branch transactions. On the path to recovery, we expect to see AAAI play an increasingly important role, redefining how customers interact with financial services.

As living and working patterns evolve, firms are adopting increasingly sophisticated AAAI to help enhance customer experiences and provide insights that can support business decisions. That requires the collection of more and more data. And this gives rise to new risks and the potential for ethical breaches.

So how can you manage these new risks? The adoption of a data ethics framework can minimise the potential risks posed by AAAI. It also provides greater transparency on how data is being used, helping to maintain customer trust.

Data ethics in the spotlight

In recent years, there has been growing media attention regarding ethical breaches. We’ve had reports of credit decisioning algorithms providing seemingly unfairly biased outcomes, through to pricing models producing adverse outcomes due to a lack of testing and monitoring. In response to this, organisations are now seeking to take the lead on data ethics. They’re questioning the ethics of the purpose of a new product or service before it is brought to market, and they’re formulating data ethics principles and educating employees on the subject.

C-suite executives in banks are increasingly thinking about how AAAI could impact their customers and revenues. As a result, we’re now seeing growing interest among financial services organisations – ranging from banks and payments processors to FinTech companies – in establishing formative principles for how they use data. 

Data ethics frameworks impact business functions across an organisation. They’re being increasingly incorporated into internal audit plans and employee learning programmes. That means data ethics needs to be embedded accordingly across the organisation – from legal and finance through to business development – and provide a structure for meeting varied stakeholder needs.

To help financial services firms manage this task, we have co-authored a paper with UK Finance on the ethical principles for AAAI in financial services. The report is designed to provide a point of reference for creating ethical principles – with ethical principles being the basis of a robust data ethics framework.  

Why data ethics is vital for financial services

Let’s quickly replay why having a data ethics framework is so important.

Customers want greater transparency

Customer experience is at the heart of organisations’ drive to innovate. Customers today expect to be able to research and buy online, with delivery the next, if not the same, day.  The current pandemic has amplified the need for easy online access to products and services, with even those who preferred to visit branches forced online during lockdown. As customers have become more digitally savvy, they have become more aware of the data organisations collect, hold and use. To keep their trust,  organisations must demonstrate they are acting in their customers’ best interests and ethically. 

Legislation lags the technology

Existing data protection and consumer laws do not factor in the impact of AAAI on individuals and society. In addition, current legislation and regulation is technology agnostic and therefore is unlikely to fully consider the ethics behind a specific technology. As there is no single, coherent legal framework, a data ethics framework could support organisations in covering all of the varying laws under one standard.  

Potential for bias in AAAI

Soon, we can expect AAAI systems to be capable of making crucial decisions that heavily affect customers, with little to no human supervision. That’s an unsettling thought for many, as AAAI decisions have the potential to be opaque. There have been several public cases where AAAI has reflected human bias or has exacerbated historic bias within datasets. Without any guiding principles concerning data, there are several risks that may adversely affect large sections of the society. 

Building and maintaining trust with a data ethics framework

Trust underpins all of the factors described above. In our Consumers and the new reality survey by KPMG, both the banking and insurance sectors reported a 3 percent decline in consumer trust after the onset of COVID-19 compared to the pre-COVID-19 world. There is a sector-wide need for organisations to anticipate and prepare for the changes in their consumers’ needs, behaviours and preferences. This is driving innovation and the sharp focus on maintaining and building trust through a clear data and AAAI ethical framework.

With a well-embedded framework, individuals, organisations and society all stand to gain the benefits from AAAI. It can pave the way for purposeful innovation – the kind that facilitates financial inclusion, improves outcomes for vulnerable customers, makes fair transparent decisions, provides personalisation and benefits wider society.

Maintaining trust, derived through a data ethics framework, is also vital to the wider uptake of ‘open finance’.  This provides financial services firms with the potential for more seamless access to customers’ transactions, credit history, savings and investments, for example. Customers will need to engage with and trust that their data is being protected and shared in an ethical way, with ethical businesses.

Of course, financial services organisations must continue to innovate to meet the changing and increasing demands of their customers. But their purpose for the use of data and AAAI to drive outcomes and decisions must be appropriate from the point of view of their customers and wider society. They need to be able to explain the reasons for their use of data and show that outcomes are free from any unfair bias. Adopting an ethical framework will support firms in building and maintaining customer trust and help to minimise potential actions that erode trust.

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