The Generative AI Revolution in Finance: Foundational Logic, Emerging Risks, and Governance Paths

Abstract

Generative artificial intelligence is a powerful engine of new quality productivity and now is profoundly changing the service models and value creation logic of the financial industry. This article believes that the empowerment of GenAI to financial industry is mainly since there is a large data foundation in the industry, while GenAI can be handier when facing complex data. The technique upgrade and application of GenAI make breakthroughs in solving problems caused by information asymmetry in the traditional financial market, especially for risk management and control. But every coin has two sides, while the banking industry enjoys the convenience brought by AI, it cannot ignore data leakage, black box dilemma caused by AI algorithms, and the systemic risks brought by model instability. Therefore, based on the study of the underlying logic and emerging risks of GenAI empowering the financial industry, this article proposes the governance paths to better play the positive role of AI in financial industry.