The Monetary Authority of Singapore (MAS) is working with banks and technology firms to develop measures to judge customers fairly when artificial intelligence (AI) is used to assess their credit risk.
It is also studying how to ensure that technology employed to market financial products to customers is used appropriately.
These are steps taken in the first phase of a national initiative called Veritas to promote the responsible use of AI and data analytics among financial institutions.
The MAS said yesterday a white paper documenting the metrics and an open-source code to allow financial institutions to adopt the measures will be released by year end.
More banks are using technology to analyse large amounts of data to determine customers' credit risk and the products to sell to them, the MAS said.
That is why it is crucial that the technology does not systematically disadvantage anyone when determining their credit risk, the central bank said.
Customer marketing is another area to look out for as marketing processes become increasingly digitalised and automated.
The MAS said: "There is increasing scope to use AI tools to analyse customer data and match products or services to customers."
"It is important that (the) AI solutions recommend the right product to the right customer at the right time," the regulator added.
Deputy Prime Minister and Finance Minister Heng Swee Keat recognised the potential of AI to transform financial services when he announced the Veritas initiative at the Singapore FinTech Festival and Singapore Week of Innovation and Technology last November.
But he also warned that the technology must be used in a safe and responsible manner.
Veritas aims to be a verifiable way for financial institutions to incorporate principles that the MAS released in 2018, based on fairness, ethics, accountability and transparency, to guide firms on the responsible use of AI and data analytics, the central bank added.
United Overseas Bank (UOB) executive director and head of group enterprise artificial intelligence Johnson Poh said that the open-source code that Veritas will release will serve as a barometer of the principles developed two years ago to guide the way in which AI models are developed within the banking and finance industry.
The open-source code "will provide a common language", he said, adding that financial institutions can then have better clarity on how to implement the principles.
UOB is working with artificial intelligence company Element AI to lead the development of metrics to ensure that bank customers' credit risk is assessed fairly when AI is used.
Mr Poh said that the development of the metrics is still in the early stages.
HSBC Bank, insurtech start-up IAG Firemark Labs and non-profit research firm Gradient Institute will lead the development of metrics for how the industry can better use AI and data analytics for customer marketing.
A 25-member consortium working on Veritas includes the MAS, UOB, DBS Bank, Standard Chartered Bank, Citi Singapore and Amazon Web Services.
Mr Amol Gupte, head of Asean and the country officer for Singapore at Citi, said that the responsible use of AI will help maximise the benefits that the technology brings to the financial sector.