Artificial Intelligence in Banking and Ombudsman Services: Addressing Cybersecurity Challenges While Ensuring Justice

Abstract

This paper explores the transformative role of Artificial Intelligence (AI) and technology in banking and Ombudsman services. The research questions focus on identifying risks and proposing mitigation strategies for fair AI adoption. A qualitative methodology was adopted, analyzing legal statutes, literature, and expert opinions. The thematic analysis categorized risks into legal, technological, ethical, and operational domains. The paper discussed AI's integration into banking, highlighting customer support, fraud detection, personalized services, back-end automation, compliance, and cybersecurity. AI-driven chatbots and virtual assistants provide round-the-clock customer support, enhancing service efficiency and customer satisfaction. Fraud detection systems can analyze transactions in real-time, preventing financial crimes effectively. Personalized banking through automated advisors and hyper-personalization improves customer engagement. Back-end automation accelerates operations, reduces errors, and lowers costs. AI also streamlines regulatory reporting and strengthens cybersecurity defenses. These innovations collectively make banking faster, safer, and more customer-centric. The paper also critically examines risks associated with deploying AI in Banking Ombudsman services. It identifies legal challenges such as threats to natural justice and lack of explainability in AI decisions. Technological issues include bias, unreliability, and cybersecurity vulnerabilities. Ethical and institutional risks involve dehumanization, accountability gaps, and erosion of public trust. Regulatory gaps exist due to the absence of specific AI guidelines, risking exclusion of marginalized groups. Results indicate that while AI enhances efficiency, it also risks violating constitutional principles and data privacy. Biases inherited from training data can lead to discriminatory outcomes. Errors and cyber threats compromise decision reliability and data security. The lack of clear liability frameworks complicates accountability. The discussion emphasizes the need for human oversight, ethical guidelines, and regulatory reforms. Strengthening cybersecurity and establishing sector-specific regulations are crucial. Responsible deployment requires balancing innovation with safeguards. Developing AI and ensuring inclusive access are vital. Implementing legal and ethical frameworks will foster trust and justice. AI can significantly improve banking and Ombudsman services if risks are managed effectively. This paper aims to support policymakers, regulators, and financial institutions in fostering trustworthy AI systems. Ultimately, responsible AI use can promote equitable, efficient, and secure banking and dispute resolution services.

DOI - https://doi.org/10.65525/SVUP.9788199328631.2025.60-73