ISTANBUL 

The rapid development and adoption of artificial intelligence (AI) poses some challenges to financial institutions, Fitch Ratings said Tuesday in a report.

"AI, which encompasses technologies including machine learning (ML), deep learning, natural language processing, robotics, expert systems and fuzzy logic, can improve operational efficiency and reduce costs for financial institutions," said the report.

"However, AI technology can lack transparency in explaining its decision process, leading to the potential for inadvertent discrimination," it added.

Some of the challenges also include data privacy, security concerns, the potential for selection bias and increased regulatory scrutiny.

Fitch warned that sectors that are less regulated can see higher adoption of AI and potentially increased criminal activity.

"Criminals may attempt to reverse-engineer or hijack AI models if ransoms are not paid; taint or manipulate data used to train models; or steal algorithms or data," said the rating agency. "Cyber criminals may also use AI themselves to attack IT systems."