Best Practices, Ethical Challenges, and Regulatory Frameworks for AI Integration in Banking: Navigating the Future

Abstract

This chapter explores the transformative impact of artificial intelligence (AI) and cloud-native software on the banking sector. It examines how AI enhances customer service, fraud detection, and risk management through technologies like virtual assistants and predictive analytics. However, these advancements introduce ethical challenges, including data privacy concerns, algorithmic bias, and the need for transparency in AI decision-making. The chapter reviews relevant regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), and offers strategies for compliance and ethical AI integration. Through case studies, it highlights successful implementations of AI in banking, illustrating effective management of ethical and regulatory issues. The chapter concludes with a look at future trends and proactive strategies to address emerging ethical and regulatory challenges, aiming to guide stakeholders in balancing innovation with ethical practices in the evolving landscape of banking technology.