Artificial intelligence could damage confidence in financial services if companies fail to make its decision-making more transparent, the CFA Institute has warned.
In a new report published on Wednesday, the global association of investment professionals said the increasing use of AI in areas such as credit scoring, investment management, insurance underwriting and fraud detection made explainability a priority for regulators, firms and clients alike.
“AI systems are no longer working quietly in the background; they are influencing high-stakes financial decisions that affect consumers, markets, and institutions,” said Dr Cheryll-Ann Wilson, the report’s author and senior affiliate researcher at the institute.
“If we can’t explain how these systems work – or worse, if we misunderstand them – we risk creating a crisis of confidence in the very technologies meant to improve financial decision-making.”
The report, Explainable AI in Finance: Addressing the Needs of Diverse Stakeholders, sets out a framework to match different kinds of explanations to the needs of users, from regulators and risk managers to software developers and clients.
It also reviews existing methods for increasing transparency, including so-called “ante-hoc” approaches that build simplicity into models from the outset, and “post-hoc” tools that shed light on why a system made a specific decision, such as highlighting which data points carried the most weight.
Among its recommendations are global standards for measuring the quality of AI explanations, tailoring interfaces for both technical and non-technical users, enabling real-time explainability in fast-moving financial decisions, and investing in training and workflows to support human–AI collaboration.
It also explores emerging approaches such as evaluative AI, which presents evidence both for and against a decision, and neurosymbolic AI, which combines logical reasoning with deep learning to improve interpretability.
“With regulators moving ahead, including through the EU AI Act and the UK’s own developing framework, financial institutions need to take proactive steps,” said Rhodri Preece, senior head of research at CFA Institute.
“This is not about slowing down innovation; it’s about implementing it responsibly. We must ensure that AI systems not only perform well but also earn the trust of those who rely on them.”