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UK regulators have warned banks on use of artificial intelligence (AI) in loan applications, as high street lenders must ensure machine learning does not worsen discrimination against minorities.
High street banks are exploring ways to automate more of their lending, including the use of AI and more advanced algorithms, to decide who to lend to based on historical data held on different types of borrowers, who can be grouped by categories such as postcodes and employment profiles.
UK financial regulators have warned banks looking to use AI to approve loan applications that they can only deploy the technology if they can prove it will not worsen discrimination against minorities, who already struggle to borrow.
Banks believe using machine learning techniques to make lending decisions could reduce discrimination against ethnic groups who have historically struggled to access reasonably priced loans. They feel AI would not make the same subjective and unfair judgments as humans.
In their submission on regulating digital finance, the EU’s financial regulators called on lawmakers to consider analysing the use of data in AI/Machine Learning models and potential bias leading to discrimination and exclusion.
Banks in the UK were cleared of racism in loan decisions by a government review almost a decade ago but were still found to be lending less to ethnic minorities.
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