A new report from a financial technology expert at the Bank of England says that inherent biases in AI systems makes it dangerous to entrust them with too much decision-making at present. Credit: Shutterstock The implicit bias of present-day generative AI models make their rapid adoption in the financial sector hazardous, according to a report by a financial technology expert working for the Bank of England. Kathleen Blake’s report, published Wednesday, splits AI model bias into two categories — bias based on underlying training data, and bias based on the results of model output. Although both reflect the human biases that developers and creators bring to AI models, the former category is impossible to counteract just by getting rid of data points that indicate, for example, femininity or non-whiteness. Blake likened data bias to the practice of redlining in mortgage lending. In a redlining system, home insurers and mortgage lenders assess non-white customers as “risky” based on their neighborhood, making credit and insurance more difficult to come by for people of color, while not directly attributing denials or higher prices to race. Similar logic is already visible in AI systems, Blake noted. “[T]he model may make underlying correlations that lead to biased decision-making based on non-protected features,” Blake wrote. “In other words, the remaining, non-protected features could act as proxies for protected characteristics.” Societal bias, by contrast, is “where norms and negative legacy from a society cause blind spots.” Blake cited an Amazon recruitment algorithm that tended to recommend more male candidates than female, because the data, historically, showed that males tended to be hired more often. AI bias is particularly dangerous in the financial sector, Blake warned. Trust in the banking system is at serious risk from the aforementioned biases displayed by AI, given that (while noticeably less discriminatory than human decision-makers), AI still charged higher rates to Black and Latinx mortgage customers when compared white ones. Moreover, the opaque “black box” nature of proprietary models means that, if a large group of important firms uses them for similar purposes, their actions could have a huge effect on the economy as a whole, and be fairly unpredictable into the bargain. Blake acknowledged that this type of destabilizing AI event hasn’t happened yet, but warned that the risks are very real, citing a 2021 case in which Apple and Goldman Sachs were investigated by the New York State Department of Financial Services for algorithmically offering smaller lines of credit to women. “Beyond the inherent issues with bias, fairness and ethics, this could potentially lead to stability issues for financial institutions or the financial system as a whole,” Blake wrote. Related content news analysis Apple earnings: About that iPhone 'slump' in China Based on information from Thursday's earnings report, it seems that data pointing to an iPhone slump in China were over-baked. By Jonny Evans May 03, 2024 9 mins iMac iPhone Apple news Microsoft begins to phase out ‘classic’ Teams Microsoft is encouraging Teams customers to move to the new, faster version of the collaboration app; the older version will be switched off next year. By Matthew Finnegan May 03, 2024 3 mins Microsoft Teams Collaboration Software Productivity Software news analysis Apple confirms it will open up the iPad in Europe this fall The latest efforts to comply with Europe’s Digital Markets Act mean developers can offer to side load apps to both iPhones and iPads in the EU. Apple has also taken steps to improve what it offers to smaller and non-commercial developers in the By Jonny Evans May 02, 2024 6 mins iPad Apple Mobile Apps news Udacity offers laid-off US workers free access to its courses for 30 days Sign-ups will be available over the next 30 days By Lucas Mearian May 02, 2024 4 mins Technology Industry IT Jobs IT Skills Podcasts Videos Resources Events SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe