Ethical challenges of artificial intelligence product innovation in South African financial services

Abstract

This research investigates the ethical complexities surrounding artificial intelligence (AI) driven product innovation within South African financial services, focusing on issues of fairness and transparency. As AI continues to transform the financial sector, ensuring responsible and equitable implementation has become a non-negotiable. Current AI practices across selected South African banks are examined by analysing challenges such as algorithmic bias, the need for financial inclusion, and the intricacies of data privacy. Drawing on qualitative data and thematic analysis from twelve semi-structured interviews, the research evaluates how these institutions address ethical dilemmas associated with the use of AI and their observance of regulatory frameworks that prioritise fairness, transparency, and accountability. To navigate these ethical challenges, this paper proposes a practical ethical framework and adoption strategy that is tailored to the unique South African context. This framework emphasizes safeguards against bias, transparency through explainable AI, continuous audits, and multi-stakeholder collaboration to ensure ethical compliance throughout AI product development. Ultimately, this research serves as a guide for South African banks, regulators, and policymakers in advancing fair, transparent, and responsible AI systems.