Whitepaper: The use of AI is on the rise in the financial sector. Utilizing machine learning algorithms to make decisions and predictions based on the available data can be highly valuable. AI offers benefits to both financial service providers and its customers by improving service and reducing costs. Examples of AI use cases in the financial sector are: identity verification in client onboarding, transaction data analysis, fraud detection in claims management, anti-money laundering monitoring, price differentiation in car insurance, automated analysis of legal documents, and the processing of loan applications.
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This white paper is the result of a research project by Hogeschool Utrecht, Floryn, Researchable, and De Volksbank in the period November 2021-November 2022. The research project was a KIEM project1 granted by the Taskforce for Applied Research SIA. The goal of the research project was to identify the aspects that play a role in the implementation of the explainability of artificial intelligence (AI) systems in the Dutch financial sector. In this white paper, we present a checklist of the aspects that we derived from this research. The checklist contains checkpoints and related questions that need consideration to make explainability-related choices in different stages of the AI lifecycle. The goal of the checklist is to give designers and developers of AI systems a tool to ensure the AI system will give proper and meaningful explanations to each stakeholder.
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Explainable artificial intelligence (xAI) is seen as a solution to making AI systems less of a “black box”. It is essential to ensure transparency, fairness, and accountability – which are especially paramount in the financial sector. The aim of this study was a preliminary investigation of the perspectives of supervisory authorities and regulated entities regarding the application of xAI in the financial sector. Three use cases (consumer credit, credit risk, and anti-money laundering) were examined using semi-structured interviews at three banks and two supervisory authorities in the Netherlands. We found that for the investigated use cases a disparity exists between supervisory authorities and banks regarding the desired scope of explainability of AI systems. We argue that the financial sector could benefit from clear differentiation between technical AI (model) explainability requirements and explainability requirements of the broader AI system in relation to applicable laws and regulations.
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The theoretical framework of this dissertation is based on Amartya Sen’s capability approach (Chapter 2). In the early 1980s, development economist Amartya Sen developed the capability framework as a broad normative framework for the evaluation and assessment of individual well-being and social arrangements mainly in countries in the Global South (Sen, 1999, 2009). I chose the capability approach was chosen because of its strong focus on the notion of freedom as the capability to live the life each individual is aiming for. The freedom to choose a particular lifestyle is an intrinsic part of Sen’s notions of agency and well-being (Sen, 1999). After elaborating on notions of agency and well-being in detail, I turn to the role of financial self-help groups and how their members are influenced by social structures. This chapter concludes by operationalizing the theoretical framework into three capabilities (C1–C3) that serve as sensitizing concepts throughout the dissertation. These capabilities focus on the potential impact CAF groups have on members’ abilities to develop social networks (C1), to control their financial household management (C2), and to adopt an enterprising attitude (C3). Chapter 3 discusses my research methodology. I describe how the three capabilities (C1–C3) were applied as sensitizing concepts in the set-up of this particular action research (Blumer, 1954). I also explain in more detail how, by using sensitizing concepts, I combined an inductive research approach with a deductive angle. Then, I elaborate on the fundamental elements of this action research project: the implementation of the CAF groups as well as the collection and analysis of the empirical data. Finally, I reflect on how I designed and carried out this action research, with a special focus on the interaction between researcher and CAF members as research participants. A more detailed background description of the Dutch financial landscape is provided in Chapter 4. The chapter focuses on two particular financial self-help groups: ROSCAs among Ethiopians and Ghanaians living in the Netherlands. Compared to the formal banking system dominating the current financial landscape, these financial self-help groups claim effectivity instead of efficiency in the operation and management of their respective groups. By exploring developments in the current financial landscape, this chapter argues that distinguishing different kinds of resilience creates possibilities for analysing the different roles of financial arrangements and institutions for the financial landscape. Thus, this explorative study on ROSCAs questions the dominance of the financial side of the coin that has resulted from the efficiency-driven institutions of the financial sector. Chapter 5 presents each CAF group in more detail. The reader gets to know the different members of each CAF group and their motivations to join. Financial performance is assessed according to members’ savings and loan behaviour during the period of their participation. The quantitative data is analysed on how much the members of a respective CAF group saved and how much they borrowed from the group’s fund during the entire period of the research. These insights help the reader to better understand the differences and similarities between the five CAF groups. Chapter 6 discusses the empirical findings from the first three CAF groups. This chapter explores whether and how participation in a CAF group improves individuals’ well-being with regard to expanding their social networks, improving their financial household management, and strengthening their entrepreneurial positions. It also shows how participating in CAF groups at the grassroots level contributes to the well- Balancing the social and financial sides of the coin26being of vulnerable people in the Netherlands. Finally, the chapter reconsiders Sen’s notion of freedom for the particular context of overconsumption, inequality, and overindebtedness. In applying Sen’s capability approach, I realized that the approach has a “blind spot” regarding individuals’ possible impacts on the structures within and around them. By adding notions of Giddens’s structuration theory to the core concepts of the capability approach, I rendered the capability approach more sensitive to how CAF-group members may interact with their surrounding structures (Chapter 7). The relation between individuals and surrounding societal structures is extensively discussed in what is often referred to as the agency-structure debate (Ritzer, 2003). This debate is based on differing views about whether and to what extent individuals have a free will and can act according to their preferences, values, and personal feelings, or to what extent they are the “product” of their surrounding social structures. By expanding the capability approach with the notions of internal structures, on the one hand, and more proximate and more distant societal structures, on the other (Stones, 2008), I detail not only how individual agents are influenced by their surrounding structures, but how they might also have – however small and modest – an impact on those structures themselves. As a result, this chapter not only provides answers to how CAF-group participation affects individual members’ access to social networks, their financial household management, and their entrepreneurial positioning, but it also enabled me to investigate how and why individuals join a CAF group to take part in a so-called countermovement. Thus, I also consider how CAF members could possibly play a role in their surrounding social structures, like the existing financial landscape and the emerging participation society in the Netherlands.One way in which a CAF group can play a role in the surrounding structures is to become a community of practice. Wenger (1998) describes a community of practice as a group of people who share a certain domain of interest that distinguishes them from others. In a community of practice, it is crucial to learn from each other by engaging in joint activities and discussions. To discuss whether and how some of the CAF groups studied here turned into a community of practice, I apply the criteria of a common goal, trust, democratic leadership, and accumulation of knowledge in Chapter 8. The application of these criteria to the functioning of the CAF groups also provides more insight into how members interacted which each other in the different CAF groups. I will show how two of the five CAF groups indeed turned into communities of practice. Chapter 9 concludes this dissertation by linking the empirical findings on the individual level (Chapters 6 and 7) with those on the group level (Chapter 8). I follow this with a general discussion of the main contribution to theory development made by the Balancing the social and financial sides of the coin27expansion of Sen’s capability approach with Giddens’s structuration theory. Then, I discuss the role of CAF groups in enabling individual participants to balance the social and financial sides of the coin. Finally, I conclude this dissertation by showing how CAF groups have the potential to empower their members to meet the expectations of the participation society and the challenges of the contemporary financial landscape. I also provide recommendations for how engaged scholars doing action research can be reflective about the way they interact with their research participants and for how practitioners can set up CAF groups in the field. In the Epilogue, I tell the story of Cash2Grow. Based on the experiences and findings of my research, I co-founded the Cash2Grow foundation to promote savings groups in the Netherlands as a tool for financial and social empowerment. By developing improved savings-group methodologies and financial education tools, the foundation aims to train staff and volunteers from different types of (welfare) organizations to establish savings groups among their target populations. At the moment, we are also collaborating with similar organizations in Spain, Italy, Germany, and Poland to learn more from each other in a project subsidized by the EU.
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To survive in the increasing globalization competition, companies are required to continuously increase their productivity and enhance innovation. To realize this enhanced productivity, Business Process Management (BPM) maturity models are often used to analyze, improve and manage business processes across the organization. Literature suggests that a relation between BPM maturity and innovation could exist and recommends more research in specific sectors. Specifically, the financial sector is facing a fintech revolution, putting an enormous pressure on how they deal with technology innovation, process disruption and service transformation. Therefore, the objective of this research is to determine the relation between business process management maturity and innovation in the financial sector. Data was collected using a survey at a large financial enterprise in Europe, resulting in sixty-eight responses. Regression analysis shows that 20.6% of the variance in innovation can be explained by BPM maturity.
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This paper seeks to contribute to sustainable business model innovation (SBMI) literature. It aims to do so by putting forward a relatively simple tool that simultaneously calculates the financial value alongside sustainability impact based on the Sustainable Development Goals (SDGs) of a proposed business model innovation. For small businesses to validate the outcome of a proposed SBMI, some form of sustainability measurement will be necessary. Simple tooling specifically aimed at small businesses do not exist. We address this gap in how to predict or create a prognosis of the combined financial and sustainability effect of a proposed business model (BM) in a frugal (easy, time and knowledge effective) and effectual (allowing for iterations, available means and calculating affordable loss) manner. The tool is called the Pos-FSBC (Positive Financial and Sustainability Business Case). The instrument is a calculation model in Excel where users insert a limited number of numerical variables. Alongside financial variables the tool uniquely links the key variable ∆ SDG to the expected quantity sold, it then calculates the contribution to the SDGs in a relevant and measurable unit. By being successful with a sustainable innovation, the tool helps businesses drive out nonsustainable competitors. The tool has been iteratively developed and tested in several students’ projects and in a pilot with practitioners. Based on the findings we propose more iterations to develop an understanding whether the tool inspires business change and if so how.
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Within recent years, Financial Credit Risk Assessment (FCRA) has become an increasingly important issue within the financial industry. Therefore, the search for features that can predict the credit risk of an organization has increased. Using multiple statistical techniques, a variance of features has been proposed. Applying a structured literature review, 258 papers have been selected. From the selected papers, 835 features have been identified. The features have been analyzed with respect to the type of feature, the information sources needed and the type of organization that applies the features. Based on the results of the analysis, the features have been plotted in the FCRA Model. The results show that most features focus on hard information from a transactional source, based on official information with a high latency. In this paper, we readdress and -present our earlier work [1]. We extended the previous research with more detailed descriptions of the related literature, findings, and results, which provides a grounded basis from which further research on FCRA can be conducted.
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One aspect of a responsible application of Artificial Intelligence (AI) is ensuring that the operation and outputs of an AI system are understandable for non-technical users, who need to consider its recommendations in their decision making. The importance of explainable AI (XAI) is widely acknowledged; however, its practical implementation is not straightforward. In particular, it is still unclear what the requirements are of non-technical users from explanations, i.e. what makes an explanation meaningful. In this paper, we synthesize insights on meaningful explanations from a literature study and two use cases in the financial sector. We identified 30 components of meaningfulness in XAI literature. In addition, we report three themes associated with explanation needs that were central to the users in our use cases, but are not prominently described in literature: actionability, coherent narratives and context. Our results highlight the importance of narrowing the gap between theoretical and applied responsible AI.
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In the aftermath of the systemic financial crises of 2007-9, several scholars argued that the problem of systemic financial crises is not well understood. At the same time, the introduction of digital technologies led to new threats and opportunities for the design of the monetary and financial system. For example, thousands of private cryptocurrencies have been implemented and hundreds of research papers on the (possible) introduction of public digital currencies have been published. It is often not explained why these new forms of digital money are needed and which (systemic) problems they (can) solve. In addition, the literature does not provide requirements nor guidelines to shape the development of the monetary and financial system in the digital age. This thesis applies design science to the monetary and financial system as a whole. The application of this novel methodology offers new possibilities to examine this complex system. The contribution of this thesis is threefold. First, different theories on money, banking and systemic financial crises have been researched through an extensive literature review and balance sheets. Second, those theories have been used to develop design requirements and guidelines. Finally, the consensus and pivotal dissensions about the systemic problem(s) of the current monetary and financial system, requirements and guidelines among experts have been identified through semistructured interviews. This research process results in widely supported requirements that demarcate the design space and widely supported guidelines that aim to give direction within the design space, that is, to the future development of the monetary and financial system.
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The future of the business sector for students in higher education is uncertain. The reasons for this are technological developments, the effects of globalisation and the shifting of business models (Brynjolfsson & McAfee, 2014; Helbing, 2014). The consequences of digitalisation and robotisation are large for professions in the financial-economic sector, such as accountancy and finance, business economy, and marketing (Frey & Osborne, 2013; Deloitte, 2016). As a result, certain jobs will disappear, but on the other hand new types of jobs will arise. It is expected that people in employment will have to have a strong adaptive ability to handle fast changes. There is an increasing expectation that they need to be mobile between employers and that they should be able to deal with a variety of new tasks, roles and positions (Dochy, Berghmans, Koenen, & Segers, 2015). Professionals need to have a sense of great flexibility in order to be able to anticipate these changes based on their own power and ambition. In addition to this adaptive ability, good interpersonal skills are essential due to the need for working in multidisciplinary teams on complex issues (Onstenk, 2017). The Social and Economic Council of the Netherlands (Sociaal-Economische Raad, 2017) presumes that the level of basic skills required to participate in an increasingly complex society is continuously growing, and they advise upcoming professionals to train their resistance, flexibility and the ability to continuously develop in order to maintain sustainable employability. In this way professionals regularly need to be able to reinvent themselves during periods of change (Van Water & Weggeman, 2017; Frie, Potting, Sjoer, & Van der Heijden, submitted for publication). This chapter will describe how the Department of Business, Finance & Marketing (BFM) of The Hague University of Applied Sciences (THUAS) has found an answer to the challenges of a Department-wide educational innovation. First it is outlined what this innovation involves and how it will be designed. The net paragraph clarifies the overlap in the competency profiles of the five programmes of BFM. Then the next steps of this educational innovation process are described. Finally, insights will be discussed as to the role of the lecturers and the business sector, as valuable partners, within this educational reform.
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