When AI Predicts Risk, Who Takes Responsibility?

As artificial intelligence becomes the backbone of financial decision-making—from credit approvals to fraud detection—the question of accountability has never been more urgent. Financial institutions worldwide are realizing that accuracy alone isn’t enough; every AI-driven decision must also be explainable, traceable, and defensible. This whitepaper examines how explainability is emerging as the new governance currency in financial services—transforming compliance from a box-ticking exercise into a foundation for institutional trust.

Drawing on insights from global regulators, industry frameworks, and iauro’s own AI-Native Software Development Lifecycle (AISDLC), the paper explores how explainable AI (XAI) strengthens governance, accelerates audits, and rebuilds customer confidence. It reveals why transparency is now a business advantage, not a regulatory burden—and how enterprises can design AI systems that think clearly, act responsibly, and justify every outcome.