Question

Discuss how the use of AI and machine learning technology is changing how financial services are provided by the industry and discuss how the use of AI and machine technology is impacting the global financial stability in general and the financial stability of the USA in particular.

Answer 1

Use of AI and machine learning technology is making the financial services being provided by the industry more effective and more robust. There are a couple of reasons for this. First of all use of AI and machine learning makes the process of risk assessment more systematic and more strong. AI does risk assessment using past data and the level of accuracy in the analysis is quite high. This high level of accuracy makes the financial services more effective. Secondly financial services have become more robust due to better fraud detection and management by AI and machine learning. Security and fraud identification is more systematic when AI and machine learning is used.

Use of AI and machine technology is impacting the global financial stability in general and the financial stability of the USA in particular in a negative manner. AI is based on a technology and hence is prone to glitches. The glitches are a rare event but when they occur they can completely destabilize the financial industry. Use of AI and machine technology leads to a situation in which providers of financial services become overly dependent on technologies and this leads them to develop similar views towards risk. This situation has the potential to amplify financial shocks as and when they occur and hence make the financial industry highly susceptible to being unstable.