Balancing innovation with compliance: Governance, risk management, and security in artificial intelligence-augmented banking infrastructure

As FinTechs have been leveraging technology to provide more efficient ways to deliver banking services to their customers, traditional banks have been delegating their risk infrastructure responsibilities to others or building technological capabilities to innovate their services. While innovative technology aims to lower the cost to develop a base product, a novelty is expected in personalized service delivery or decision-making, availability, and multi-functionality in a single applet. The use of Artificial Intelligence tools to facilitate those techno-commercial characteristics is becoming more and more widespread. However, as a critical piece of the technology stack made available and accessible as a Service, AI in its various forms is also contributing to a shadow banking ecosystem of banks and financial institutions creating challenges for the conduct of monetary policy and the regulation of economy-wide financial stability risks. This has led banks to explore the use of AI to be innovative in their service invention delivery.