The Bank of England (BofE) has raised concerns about the potential impact that artificial intelligence (AI) could have on the UK economy, as the technology stands on the verge of rapid acceleration.
This week, the Bank’s Financial Stability Committee (FSC) released its Financial Stability Report, a biannual assessment of the UK’s fiscal standing. In this report, AI and machine learning (ML) were singled out as areas for further review.
Summarising, the FPC said that it would continue to consider ‘the financial stability risks of AL and ML in 2024,’ and work with other ‘relevant authorities’ to ensure Britain’s financial system is resilient to any possible risks.
AI has emerged as one of the standout technologies throughout 2023, captivating the attention of many. For much of the general public, the content creation capabilities of ChatGPT has been the most visible function.
For finance and payments, the tech has been used for some time as a risk assessment tool as well as for screening accounts to check for potential anti-money laundering and terrorist financing threats.
In the gambling industry, the tech has become a major talking point as a marketing tool but also to ensure compliance with regulatory requirements throughout the customer onboarding and payments process.
In the face of this, there have been well publicised concerns that AI may go ‘too far’. In a press conference following today’s FPC report, Bank of England Governor, Andrew Bailey, explained that this is what the Bank hopes to address.
“We obviously have to go into AI with our eyes open,” Bailey said. “It’s not out of control in the sense of 2001: A Space Odyssey. It’s actually that the thing is so complicated in many of its forms that understanding exactly what the black box delivers is very hard.”
The Bank’s report comes as AI continues to be highlighted as one of the biggest technological innovations driving the UK fintech sector forward. In a recent statement, AI-backed finance and HR solutions firm Workday expressed hope that the tech’s adoption will continue at a strong pace.
Tim Wakeford, Workday’s Vice President of Financials Product Strategy, said: “Finance may be perceived as a more risk-averse segment of the business, but it is one of the most promising when it comes to innovation and change.
“According to our research, organisations cannot afford to hold off for much longer when it comes to adopting AI, as they risk falling behind.
“CFOs and finance teams that embrace AI, build a robust data strategy, uplevel performance, and navigate risk will be well poised to drive high-value insights, protect and grow business value, and enable the organisation to navigate future opportunities and challenges with greater agility.”
According to Workday’s data, around 77% of global fintechs have reported using AI to work at a faster pace, reduce risk and ‘deliver strategic business value’.
Regarding specific business functions, 34% said that they had used AI to make forecasts and inform budget decisions and a further 32% used the tech for strategic planning across business lines and enhancing scenario planning.
It is not just fintechs that are increasingly embracing AI. In the recent Autumn Statement, the UK Chancellor of the Exchequer, Jeremy Hunt, outlined that the government would pump £500m into AI development as part of its ambition to make the country a leading global fintech hub.
“When it comes to tech, we know that AI will be at the heart of any future growth,” Hunt commented as he unveiled the Autumn Statement last month, reiterating a stance outlined earlier in the year at the POLITICO Tech UK event.
At yet another conference, the AI Safety Summit in this case – a couple of weeks before the budget announcement – PM Rishi Sunak offered his own view on the potential risks of AI.
“People developing this technology themselves have raised the risk that AI may pose and it’s important to not be alarmist about this. There’s debate about this topic. People in the industry themselves don’t agree and we can’t be certain.”
There is clearly a diverse convergence of viewpoints on AI adoption, with fintech seemingly ready to make use of the technology for commercial purposes and the UK government keen to accelerate its growth – apparently with respect to the risks – to drive economic development.
For the Bank of England, as Governor Bailey explained, potential risks to UK financial stability need to be ironed out before AI is fully accelerated. In particular, the presence of ‘hallucinations’ in AI was of concern to the Governor.
“If you’re going to use it for the real world and real financial services, you can’t have that sort of thing happening. You’ve obviously got to have controls and an understanding of how this thing works, and there’s a lot to do there.”