Ethical AI in Financial Decision-Making : Transparency, Bias, and Regulation

Authors

  • Odunayo Oyasiji  Independent Researcher, Calgary, Alberta
  • Adeola Okesiji  Independent Researcher, USA
  • Chikaome Chimara Imediegwu  Access Bank PLC, Nigeria
  • Okeoghene Elebe  Proburg Ltd, Lagos Nigeria
  • Opeyemi Morenike Filani  

Keywords:

Ethical AI, Financial decision-making, Transparency, Bias, Regulation

Abstract

The increasing integration of artificial intelligence (AI) in financial decision-making processes—ranging from credit scoring and fraud detection to algorithmic trading—has transformed the financial services landscape. However, this rapid adoption raises significant ethical concerns, particularly regarding transparency, bias, and regulatory oversight. This examines the ethical challenges associated with AI in finance, focusing on the need for transparent, fair, and accountable systems that align with societal values and regulatory standards. Transparency is a central issue, as many AI models, especially complex deep learning algorithms, operate as "black boxes," making it difficult for users and regulators to understand how decisions are made. This lack of explainability can undermine trust and hinder compliance with regulatory requirements. To address this, explores the role of explainable AI (XAI) techniques, such as SHAP (Shapley Additive Explanations) and LIME (Local Interpretable Model-agnostic Explanations), in improving model interpretability. Bias in AI systems presents another critical challenge. Historical data often reflect existing inequalities, which, when used to train AI models, can perpetuate or even exacerbate discrimination in financial decisions such as loan approvals or insurance pricing. This analyzes various sources of algorithmic bias and highlights fairness-aware machine learning approaches for mitigating these risks. Furthermore, this reviews the evolving regulatory landscape, including initiatives like the European Union AI Act, U.S. fair lending regulations, and emerging African fintech policies. It emphasizes the importance of ethical AI guidelines and the potential of regulatory sandboxes for testing AI innovations within controlled environments. This concludes by advocating for robust interdisciplinary collaboration among financial institutions, data scientists, and policymakers to develop ethical AI systems that are transparent, fair, and compliant, ensuring responsible financial innovation and consumer protection.

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2023-10-30

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Volume 9, Issue 5, September-October-2023

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Research Articles

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Odunayo Oyasiji, Adeola Okesiji, Chikaome Chimara Imediegwu, Okeoghene Elebe, Opeyemi Morenike Filani, " Ethical AI in Financial Decision-Making : Transparency, Bias, and Regulation" International Journal of Scientific Research in Computer Science, Engineering and Information Technology(IJSRCSEIT), ISSN : 2456-3307, Volume 9, Issue 5, pp.453-471, September-October-2023.