Implications of Algorithmic Bias in Financial Services

Abstract

Algorithms are wonderful and need data, technology, and human ethical intervention to perform. But they can easily cause biases leading to severe implications due to an imbalance of these factors. It is evident that algorithms, specifically AI and ML, are revolutionary forces that have disrupted several sectors, but in finance and healthcare, they can have major implications on human lives given their direct impact on the livelihood and health of individuals. This makes them the most highly regulated industries. The research shows four benchmark social norms that algorithms can potentially defy causing major societal ramifications. These algorithms categorized by risk levels breach social benchmarks impacting stakeholders across the spectrum. Navigating through real-world sources and implications of algorithmic bias, this chapter underscores the importance of addressing algorithmic bias to inform industry stakeholders, policymakers, and researchers about the pros and cons of AI adoption. This is to fortify the ethical foundation of financial systems as it relates to the use of AI.