Presentation slides

FINM4100

Analytics in Accounting,

Finance and Economics

Ethical considerations and more

applications of business analytics and

technology in accounting, finance and

economics

Week 11

Lesson Learning Outcomes

1 Evaluate ethical considerations regarding FinTech

and the use of analytics in Accounting, finance and

economics

2 Investigate case studies

3 Find potential solutions to ethical, privacy and legal

issues related to the finance sector and its use of data

4 More applications of analytics in finance

Glossary1: Data Ethics

• Data Ethics relates to

- Responsible use of data

- The value placed on data by competing parties

- The purpose and interests of data processing

• It is about the right to keep your personal data protected

• It is about transparency & accountability

https://dataethics.eu/data-ethics-principles/

One implication is that Individual humans should have control of their data.

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Where we are at…

• More and more accounting and finance organisations are adopting AI and analytics

• There’s already an 80 - 90% reduction in time taken to do usual tasks

• The roles of professionals in this area are changing as repetitive tasks are automated

• Technology is changing the way we deal with compliance

• Ethical questions are arising daily

https://bernardmarr.com/artificial-intelligence-in-accounting-and-finance/

This Photo by Unknown Author is licensed under CC BY-SA-NC

This Photo by Unknown Author is licensed under CC BY-SA

Where we are heading..

• Near real-time insights

• Algorithms will transform ideas around compliance and

reduce fraud costs and lead to….

• More flexible work arrangements and different roles

• Possible need to hire an ethics expert

•

• The redefining of ethical conduct in business

Case Study: Google a bank?

• It hasn’t been easy for all financial institutions to keep up with new technology and demand for convenient services

• Consequently…. Amazon, Apple and Google have started to offer services normally offered by big banks

• Example: Google Pay

• The issue: Google is an advertising company with ads representing 71% of its revenue sources in 2019.

• Given Google’s history of collecting Terrabytes of data from your location, emails, shopping and song preferences

• Q: Do we really trust Google as a bank?

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https://techcrunch.com/2021/02/19/fintech-companies-must-balance-the-

pursuit-of-profit-against-ethical-data-usage/

This Photo by Unknown Author is licensed under CC BY-NC

Glossary 2: What is an ETF?

• Exchange traded fund (ETF) is a kind of “pooled

investment security” (or basket of them) which can be

traded like a single stock

• They track a particular index, sector or commodity, e.g SPY

tracks the S&P 500 index

https://www.investopedia.com/terms/e/etf.asp

Glossary 3: What is

Superannuation?

• “Superannuation (or ‘super’) is money set aside while

you’re working to support your financial needs in

retirement. Your super is invested in a range of assets to

help grow your balance so you can have the best

possible retirement outcome.”

This Photo by Unknown Author is licensed under CC BY-ND

Glossary 4: What is a robo-advisor

• “Robo-advisors are digital platforms that provide

automated, algorithm-driven financial planning services

with little to no human supervision. A typical robo-advisor

asks questions about your financial situation and future

goals through an online survey; it then uses the data to

offer advice and automatically invest for you.”

https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp

This Photo by Unknown Author is licensed under CC BY-NC

Case study: Ethics and investing of

your money by others

• Are ETFs, superannuation funds and robo-advisors ethical?

• ETFs and superannuation are everchanging “holding structures”.

• For example, an Australian shares ETF or choosing Australian Shares as an option in a super fund. In both cases you are buying shares but not directly.

• Robo Advisors also invest for you, so you are not directly buying the items yourself, just buying based on non-human advice.

• How do you know that they are ethical?

• Ways to find out if they are ethical or not:

– to understand how your money is invested

– To ask them for their environmental, social and governance policy

Activity 1: Is technology neutral?

• Form small groups

• Watch the video at https://www.youtube.com/watch?v=q_AwceyM68k

• Discuss the following:

Q1. You can’t see ethical value in technology by just looking at it, so where

do we have to look to find it and how can we apply moral judgement

regarding a particular technology?

Q2.What is so special about technology?

• Solutions to potential ethical,

privacy and legal issues

This Photo by Unknown Author is licensed under CC BY-NC-ND

Holding financial institutions and staff

accountable • Australian Securities and Investments Commission (ASIC) is Australia’s

corporate, markets and financial services regulator

• The Australian Prudential Regulation Authority (APRA) establishes

frameworks of standards and practises in the financial sector

• Australian Competition and Consumer Commission (ACCC) helps

protect consumers https://www.accc.gov.au/

• The Office of the Australian Information Commissioner (OAIC) has a

great deal of documentation on Australia’s data privacy laws.

Examining ethical conduct at an

individual level

• Given that the ethical implications of AI are such a large concern, Who will examine the ethical dilemas at an individual level?

• If you don’t have an ethics officer, it may be your organisation’s management account or compliance officer.

• They will – Practice ethical standards

– Create an culture of ethical nature

– Use diagnostic analytics in cases where AI caused ethical issues

https://sfmagazine.com/post-entry/january-2021-ethics-maps-for-ai-analytics/

Ethics Mapping

• What is an ethics mapping?

• An ethics map is a map of the range of concerns you might have in the context of the type of service your staff/AI is suppose to provide

• An overview of certain behaviours, e.g. what may be considered as acting in the accounting or finance space with

– no ethics

– indifference (or a relative view of ethics)

– value-based ethics

– (see examples next slide)

https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.196.7022&rep=rep

1&type=pdf#:~:text=Page%201,Ethics%20and%20the%20Public%20Service'

This Photo by Unknown Author is licensed

under CC BY-SA-NC

Ethics Mapping Examples for a

Financial Institution

No values Relative Values or

Indifference

Value – based ethics

Does not check AI code

for approving loans for

bias

Avoids addressing code

bias or does not see a

problem

Codes with fairness and

non-discrimination in

mind regarding the

approval of loans

Collects data and sells it

on without permission

Collects data they may

not need and does not

see an issue with

sharing it

Collects data for a

specific purpose and

does not share it

https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.196.7022&rep=rep

1&type=pdf#:~:text=Page%201,Ethics%20and%20the%20Public%20Service'

Activity 2: Ethics Mapping

• Form small groups,

• Suppose that you work in either accounting, finance or economics

• Create an ethics mapping table with four rows

• Each row should provide an example as in the previous slide

No values Relative Values or

Indifference

Value – based ethics

Example 1……

Example 2……

Example 3……

Example 4……

Reviewing the banking code

of practice

• “Australia's banks may face rules on ethical use of tech, data”

• The banking code of practice was reviewed in 2021

• The code consists of a “set of enforceable standards” that customers and small businesses can expect from Australian banks, i.e. a set of rules setting out the rights of customers.

• The safe and secure handling of bank customer’s data was questioned in the review,

– especially in the context of financial and elder abuse, as well as domestic violence

• What issues do you think they are talking about? https://www.itnews.com.au/news/australias-banks-may-face-rules-on-ethical-use-of-tech-data-566937

Case Study: Digital banking and privacy

• “Banks say they should not be treated like Big Tech by online privacy bill”

• Along similar lines to the review of the banking code of practice

• A new online privacy bill aimed at tech companies may affect banks, insurers, superannuation funds, etc., because it is so broad in its definition of “online platforms”

• Examples of obligations: • 26KC(4)(a) “respond to a request to not use…personal information within a

reasonable period.”

• 26KC(2) “Notify an individual…of the purposes for which the organisation collects, uses and discloses personal information.”

https://www.itnews.com.au/news/banks-say-they-should-not-be-treated-like-big-tech-by-online-privacy-

bill-575701This Photo by Unknown Author is licensed under CC BY-SA-NC

Activity 3: Why not to use a robo-

advisor

• Watch the video about robo-advisors at

• https://www.youtube.com/watch?v=wjB3hp1RUKQ

Q1. What reasons are given for not using the robo-advisors

Q2. Given that this guy is advertising his own business,

what do you think?

Reduce bias in AI-based financial

services

• Bias is often present in input data in finance

• Ways around this are: – avoid gender, racial or ideological biases

– use complete and representative data

– have diversity in development teams

– monitor situations where AI systems self-improve, acquire new behaviours and have unintended results

This Photo by Unknown Author is licensed under CC BY

Consider ethical, privacy and legal

issues on a case by case basis, e.g.

• Many platform owners currently have the option to use

customer data for commercial/other purposes (in the fine

print)

• Suggestions to make things more ethical:

– Allow customers to disable use of some personal data

– Inform users of how exactly their data is being used

– Allow customers to choose how they want to share their data,

what type of data and for what purpose

https://fintechweekly.com/magazine/articles/what-about-the-ethics-of-

fintech#:~:text=Ethical%20considerations%20for%20FinTech,-

First%2C%20many%20online&text=Customers%20should%20be%20able

%20to,vis%2D%C3%A0%2Dvis%20customers.

Glossary 5: What is Open Banking?

• Open banking is about sharing your banking data with third parties.

• In Australia, the third parties must accredited by the ACCC

https://www.ausbanking.org.au/priorities/open-banking/

This Photo by Unknown Author is licensed under CC BY

Data that can be shared • Personal information

• Account balances

• Bank product information

• Transaction amounts

Activity 4: Think-group-share

• Form small groups and brainstorm

1. Potential ethical and privacy issues in relation to open banking

2. ways in which to make open banking ethical, safe and private where necessary

This Photo by Unknown Author is licensed under CC BY-SA-NC

Applications of analytics in finance

In prep for next week we will start revising some methods and applications in Finance

Broad application areas are

• 1. Risk Analytics

• 2. Real-Time Analytics

• 3. Consumer Analytics

• 4. Customer Data Management

• 5. Personalized Services

• 6. Financial Fraud Detection

• 7. Algorithmic Trading

https://www.upgrad.com/blog/data-science-use-cases-finance-industry/

This Photo by Unknown Author is licensed under CC BY-ND

This Photo by Unknown Author is licensed under CC BY

More applications

• Forecasting of customer

balances

• Personalised

recommendations for

savings, investments and

loans

• Targeted offers based on

spending patterns

• AI-based money

management programs

https://personetics.com/

Last minute questions?

This Photo by Unknown Author is licensed under CC BY