With the EU AI Act coming into force on October 1, 2024, a paradigm shift in the use of artificial intelligence in the banking and financial sector is imminent.
This is because the new legal framework regulates the use of AI in the EU and places a particular focus on protecting consumer rights and ensuring and maintaining ethical standards in technology. For banks, which are increasingly relying on AI in areas such as credit assessment, risk management and fraud detection, the AI Act poses major challenges. But it also presents opportunities to gain a competitive advantage!
The EU AI Act classifies AI systems according to their risk and sets strict requirements for high-risk applications that are frequently used in the financial sector - such as AI-supported algorithms for credit assessment. Such systems must now be designed with particular transparency and be accompanied by human supervision at all times so that the Decision-making processes remain comprehensible, controlled and verifiable for all parties involved. Another example of high-risk applications is the use of AI in fraud detection, where the algorithms must be continuously monitored and checked: This serves to ensure that no discriminatory or erroneous decisions are made.
In short, banks are required to implement comprehensive compliance measures, such as regular audits and detailed reports on the functioning and results of their AI-supported systems.
Against the backdrop of compliance with the EU AI Act and the requirements of DORA, which have been in place since 2022, banks are currently facing a number of obstacles. In addition to transparency, digital resilience must also be ensured in accordance with DORA in order to secure systems (and this naturally also applies to the use of AI) against cyber attacks and other digital threats. These requirements undoubtedly represent a challenge, but they also open up opportunities. On the one hand, you have an opportunity to optimize internal processes and make them more efficient in order to not only remain compliant and avoid regulatory risks, but also to increase operational efficiency and make infrastructures more resilient.
You can also find out more about responsible use of AI, increased transparency and position itself as a trustworthy partner for customers and supervisory authorities through correspondingly open communication - for example in risk assessments or credit decisions.
Nowadays, there is great potential in building trust in order to win the favor of customers. The majority of products and services in the banking and financial market are less transparent. Neo- and direct banks shine with lean and user-friendly but non-transparent processes. What traditional regional banks have ahead of them: The direct contact with the customer, trust and proximity.
Confidence building is therefore also a decisive success factor when it comes to AI and infrastructure security. After all, when it comes to money, customers want one thing most of all: a partner they can trust when it comes to their finances. And this potential must also be exploited against the backdrop of the EU AI Act and DORA. Banks that find the right balance between innovation, transparency and regulation can use the provisions of the regulatory measures as an opportunity for customer loyalty.
We now know that the AI Act can be more than just a regulatory hurdle for banks - it can become a competitive advantage. By focusing on the transparency and ethical use of AI, you can strengthen customer trust and thus consolidate your market position. We support you in taking advantage of the opportunities offered by the AI Act and aligning your AI strategy optimally with your customers.
As an innovation partner for banks, we are deeply rooted and have developed a comprehensive understanding of the requirements of the banking sector over the years.
So feel free to contact us about the use of AI in the banking environment.
We will be happy to advise you and support you in integrating an efficient and compliant AI strategy into your processes.
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