Financial services firms have been urged to consider the risks that AI presents from a brand perspective, amid tightening regulations on the new technology.

Tom Morrell (pictured right), marketing veteran and founder of NodeRiver, a brand strategy and AI consulting firm, has highlighted the shift from human-directed AI to “somewhat autonomous” AI, which could create potential pitfalls for financial services firms.

“The straight line is towards this agentic AI landscape,” he told Alternative Credit Investor. “That means AI will be responding to its environment somewhat autonomously, and that will move on from human-directed AI.”

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He said that “AI is becoming the brand” and, therefore, chatbot interactions should be considered “a brand experience”.

Private credit managers are among the financial services firms tapping into AI to support better investment decision-making, risk management and client communications.

A survey conducted by tech provider Broadridge last year found that 66 per cent of private equity and credit managers are making either ‘moderate’ or ‘large’ investments in AI.

Notably, the rise of the retail channel means that private credit managers are having to adapt their client communications to distribute personalised updates to large numbers of customers or develop chatbots, making AI particularly pertinent to the sector.

“Because of that ‘bloodstream’ of AI that will run through the way organisations operate, brand leaders will need to have a seat at the table of technical conversations,” said Morrell.

Read more: Private credit fund managers embrace AI despite risk warnings

“When AI makes a mistake for instance… it’s not the algorithm that’s in question, it will be the brand that takes the hit. In financial services, institutions are built on trust and predictability, and anything that feels opaque or biased undermines that foundation.”

He believes that brands are likely to compete on “showing how responsibly they deploy AI and not just how creatively they deploy it”, and suggested they appoint a chief AI officer to oversee their execution of the technology.

Morrell also pointed to the need for AI literacy within organisations, given that it is the “lack of knowledge which creates a risk”, although he acknowledged that an AI “skills vacuum” may make this harder.

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In September this year, the UK government released a Trusted third party AI assurance roadmap in which it set out its ambitions for the third-party assurance market in the UK and its actions to support this emerging sector.

“The AI Assurance roadmap is designed to make AI trust provable through independent verification,” said Morrell. “The government is predicting that by 2035 it will be an £18.8bn market and it’s something the UK wants to become a leader in. This governance space is going to become important.”

Meanwhile, ISO/IEC 42001, published in December 2023, is the first certifiable AI Management System standard and “creates a baseline for good compliance”, according to Morrell.

“One of the initial points of that standard is to look at your organisational profile and the context you’re operating in, and then you would conduct an impact assessment – so, how is my AI impacting customers, stakeholders, staff, for instance?” he said.

“AI won’t just change how brands operate, it will test their creativity and their integrity.

“Creativity without governance is risk; governance without creativity is irrelevance. The brands that thrive will be those that turn compliance into a canvas for innovation.”