Artificial intelligence can lead to global financial crisis: WEF report

Moneycontrol News

A new report by the World Economic Forum (WEF) has claimed that use of artificial intelligence (AI) has the potential to produce a global financial crisis in the future. According to Jesse McWaters, head of AI in Financial Services Project at WEF, the primary issue lies in the way global financial markets are highly incorporating machine learning and AI.

As per a report in The Next Web, the paper further suggests that services based on the blockchain technology, like bitcoin operate in a decentralised data environment. Earlier, cloud-based systems were used by one institution, and now an umpteen number of banks and markets are sharing the very same environments sometimes. And this makes it easier for cyber criminals to target and attack these systems. “A more networked world is more vulnerable to cybersecurity risks, and it also creates concentration risks,” McWaters said.

The WEF report also raised question of the involvement of big technology companies in the financial sector. They say that tech companies will get an opportunity to get into the financial sector because they have knowledge and expertise in AI and also have access to a wide range of consumer data. McWaters points out that these some of these tech entities could be the same companies capable of building "biased algorithms, racist chat bots and fake news."

Echoing similar views, Andrew Lo, a professor at Massachusetts Institute of Technology's (MIT) Sloan School of Management, in a talk he gave in 2013, said that systems that are so complex can just collapse inwards, adding that "technological advances in electronic market-making, algorithmic trading, telecommunications, and computing power" have led to a more efficient financial industry, but also one that is "nonlinear, densely interconnected, and tightly coupled."