Customer trust drives the adoption of Artificial Intelligence

Artificial Intelligence (AI) is an integral part of the Fourth Industrial Revolution (4IR). AI is closely linked with consumer welfare. Consumers are greatly benefited when AI drives innovation to provide novel interactive applications using facial and voice recognition, speech to text etc. to improve the user experience of availing products/services through price/product comparison tools and tailored products/services.

It is also known to be having the potential to drive effective delivery of public services, such as those pertaining to healthcare and education, among others. For instance, AI is being extensively used in finding public health solutions for Covid-19, including drugs and vaccines, apart from its use in tracking and tracing.

Firstly, AI systems rely on processing big data sets, which contain a mix of personal data, sensitive personal data, community data, and non-personal data. Many times, such data is prone to breaches and privacy violations. Secondly, AI systems are only as good as the data they process. Biased data sets on grounds of race, gender, income, etc. are known to lead to biased AI decision- making leading to discrimination and prejudice towards a certain class of consumers.

Thirdly, AI has the potential to enable businesses to ascertain consumers’ willingness to pay for a given product/service. This may lead to price discrimination, through dynamic pricing, thereby adversely impacting consumer welfare.

Also, businesses, empowered with AI, can assess consumer preferences and behavior to orchestrate personalized advertisements, offers, and inducements, which although sometimes beneficial for consumers, can also lead to unduly influencing the choices and reactions of the consumers. This may lead to consumers losing absolute control over their purchase decisions.

Last but certainly not the least, there are also risks of market collusion (tacitly) between close competitors, leading to loss of choice and higher prices for consumers by the violation of competition laws.

These risks arise because while AI makes predictions for consumers based on their data, it functions within a ‘blackbox’. This ‘blackbox’ creates information asymmetry for consumers in understanding the processes and design of AI mechanisms through which these technologies come to a decision.

India requires immediately a data protection law that can manage the potential negative externalities arising from the use of AI and ensure individual privacy.

A robust competition policy would also be helpful in minimizing risks. There is already a consumer oversight mechanism prescribed under the recently passed new Consumer Protection Act to provide adequate consumer redress.