There are critical hurdles to clear before banks are able to unlock the potential of artificial intelligence, according to fresh data from Temenos and the Economist Intelligence Unit.

“Artificial intelligence will be used in all sectors of the financial industry,” said Hani Hagras, chief science officer at banking software provider Temenos. “But there are some hurdles that banks need to face, which can set back the integration of AI in financial services.”

The study stated that “77% of executives in the industry agree that artificial intelligence will separate winning banks from the losing ones,” as the COVID-19 pandemic is set to “intensify the use of AI in banking.” Teaching the AI to be objective is essential, and feeding it a diverse set of data can help prevent bias in decision making, Hagras said. 

“Homogeneous sets of data could result in decisions that unfairly disadvantage individuals or groups of people, like [for example] discriminatory lending,” Hagras said. 

Last year, Apple Card came under fire for discriminating between female and male card applicants. Many female applicants were given lower credit limits than their male counterparts — or were rejected outright by the AI used in the decision making. 

“The issue with their approval model like Apple’s is that the data is biased, for instance maybe that they didn’t feed their AI enough data sets of female applicants,” Hagras said. “Their black box model didn’t give them a straight answer as to why their model was approving applicants subjectively.”

“Black box” risks occur when complex algorithms provide results that cannot be explained. The Temenos study also identified a lack of human oversight as a key concern surrounding AI. As financial services further integrates AI, the intelligence’s complexity increases with the task at hand, Hagras explained. 

The development of AI platforms is the second-highest priority for banks and financial institutions after cybersecurity, and prompts the need for effective governance, the study stated. 

The Geneva, Switzerland-based Temenos provides software banking services to 3,000 banks around the globe, including HSBC, ING and Openbank. The company provides core banking, digital front office portal, payment and AI solutions to financial institutions.

See also: Temenos is betting on a social banking tool to help small banks compete

A key challenge for the use of AI in European banking is an inability to both understand and explain how it comes to decisions, Andreas Papaetis, a policy expert with the European Banking Authority (EBA) stated in the report. 

“AI is still at an early stage in banking and is likely to grow,” Papaetis said. “There isn’t anyone who can answer everything about it now.”

Bank Innovation Build, which takes place Sept. 9-10 as a virtual experience, is a must-attend industry event for professionals overseeing financial technologies, product experiences and services. Register here.