Applications of Explainable Artificial Intelligence in Finance-A Systematic Review of Finance, Information Systems, and Computer Science Literature

Management Review Quarterly
https://doi.org/10.1007/s11301-023-00320-0
Applications of Explainable Artificial Intelligence

in Finance—a systematic review of Finance, Information
Systems, and Computer Science literature
Patrick Weber1 · K. Valerie Carl1 · Oliver Hinz1
Received: 16 November 2022 / Accepted: 13 January 2023

© The Author(s) 2023
Abstract
Digitalization and technologization affect numerous domains, promising advantages
but also entailing risks. Hence, when decision-makers in highly-regulated domains
like Finance implement these technological advances—especially Artificial Intelli-
gence—regulators prescribe high levels of transparency, assuring the traceability of
decisions for third parties. Explainable Artificial Intelligence (XAI) is of tremen-
dous importance in this context. We provide an overview of current research on XAI
in Finance with a systematic literature review screening 2,022 articles from lead-
ing Finance, Information Systems, and Computer Science outlets. We identify a set
of 60 relevant articles, classify them according to the used XAI methods and goals
that they aim to achieve, and provide an overview of XAI methods used in different
Finance areas. Areas like risk management, portfolio optimization, and applications
around the stock market are well-researched, while anti-money laundering is under-
studied. Researchers implement both transparent models and post-hoc explainabil-
ity, while they recently favored the latter.
Keywords Explainable artificial intelligence · Finance · Systematic literature

review · Machine learning · Review
JEL Classification G00 · L50
* Patrick Weber
[email protected]
K. Valerie Carl
[email protected]
Oliver Hinz
[email protected]
1
Chair of Information Systems and Information Management, Goethe University Frankfurt,
Theodor‑W‑Adorno‑Platz 4, 60629 Frankfurt am Main, Germany
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Vol.:(0123456789)
P. Weber et al.
1 Introduction
The Finance industry is under constant development, always using and adapting
to new technological opportunities (Gimpel et al. 2018)—like Artificial Intelli-
gence (AI) and Data Analytics—that shape private and working lives worldwide.
Financial institutions benefit from technological advances, recently from AI
deployment (Alt et al. 2018; Goodell et al. 2021): Due to their strong predictive
performance, AI-based systems are becoming increasingly crucial for decision-
making in various settings and offer a wide range of opportunities for companies
to exploit the economic potential of augmentation (Collins et al. 2021). In line
with this development, academia renewed its interest in researching the applica-
tion of AI in the financial sector (Cao 2022; Padmanabhan et al. 2022). The appli-
cation scenarios in the area of Finance are very diverse and have specific require-
ments for implementing automated systems. However, they have in common that
they illustrate resentment against the black-box nature of AI-based systems, thus
limiting their widespread use and hampering exploiting their full potential. This
is where Explainable Artificial Intelligence (XAI) methods can help to counteract
these adoption and implementation hurdles and exploit automation’s full potential
in regulated industries like Finance. Therefore, research on XAI in Finance gains
interest (Adadi and Berrada 2018).
In general, XAI tries to mitigate the problem of non-transparency of AI and pro-
vides explanations to make the inner workings of AI models interpretable and easy
to understand, as AI-generated rules from data are often unintelligible for humans.
This unintelligibility creates a barrier concerning explainability and ultimately hin-
ders the practical deployment of AI models, especially in highly-regulated applica-
tion domains like Finance. Thus, XAI is a driver of further AI usage and adoption
(Adadi and Berrada 2018; Janiesch et al. 2021; Mirbabaie et al. 2021; Sigrist and
Hirnschall 2019) in particular in these domains as it helps to mitigate the current
black-box nature of AI-based systems, i.e., unobservable inner workings.
Therefore it is not surprising that technological development has already found
its way into the Finance domain. There are multiple areas of Finance examining and
the first already employing XAI techniques, including risk management and port-
folio optimization. One application scenario within risk management, which refers
to a state of corporate failure (Sigrist and Hirnschall 2019), is default prediction.
This specific area deals with predicting the probability of lenders committing default
by using information such as profiles or loan history. As a mass business, there is
a frequent and continuous need to reevaluate the default risk. AI methods support
these endeavors, e.g., by assessing enormous amounts of available data and making
informed recommendations. However, the reasons for these recommendations are
often not transparent or comprehensible, leading to implementation resentment. XAI
addresses these reservations by complementing AI-based suggestions with explana-
tions to ensure they are discrimination-free and thoroughly founded, rendering the
AI methods usable in the industry (Park et al. 2021).
In addition to these adoption hurdles, in a highly-regulated application domain
such as Finance, laws and regulations condition the need for using XAI systems,
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Applications of Explainable Artificial Intelligence in Finance—…
as AI systems often would not comply with the law (Weber et al. 2020). Recent
law initiatives, e.g., the US Financial Transparency Act of 2021 (FTA) (Maloney
2021) or the EU Artificial Intelligence Act (AIA) (European Commission 2021),
prescribe very high levels of transparency when applying AI-supported decision-
making in practice (Hoofnagle 2013; Elliott et al. 2021) in order to ensure trust in
and reliability of these systems. The proposed US FTA gives the following justifi-
cation: The act aspires to make reported information electronically searchable, to
enable the creation of RegTech (i.e., technology supporting regulatory processes)
and AI applications, and to decrease regulatory compliance burdens through
standards and the enhancement of transparency and accountability.1 The proposed
EU AIA addresses AI’s risks or negative consequences for individuals or society,
stating: “Rules for AI available in the Union market or otherwise affecting people
in the Union should therefore be human centric, so that people can trust that the
technology is used in a way that is safe and compliant with the law, including the
respect of fundamental rights.” Regarding transparency, the AIA underlines pro-
portionality, imposing higher transparency requirements on so-called high-risk
AI systems such as those in Finance or Healthcare. Besides, the EU General Data
Protection Regulation (GDPR) requires that decisions must always be the respon-
sibility of people (Art. 22 GDPR), requiring some trust from employees and their
ability to trace decisions made by an AI. Furthermore, some national authori-
ties, e.g., the German Federal Financial Supervisory Authority, enforce additional
requirements on the financial industry in particular, e.g., about the traceability of
decisions and thus increased transparency (Pasquale 2015; BaFin 2018), which
has always played an essential role (Vishwanath and Kaufmann 1999). Accord-
ingly, evaluating XAI systems in Finance is essential for the applicability of such
systems in these highly-regulated application domains, as automation aside from
XAI models is less feasible from a regulatory point of view.
Nevertheless, research on XAI in Finance is widely dispersed (Elliott et al.
2021), making it more difficult for researchers and practitioners to unlock the full
potential of XAI in the Finance domain. This paper aims to aggregate this scattered
knowledge to provide an overview of the current state of research, including pos-
sible future research avenues, and to support practitioners’ implementation of XAI
in financial business practice. A structured overview could represent another step
towards realizing the full potential of AI-based systems, especially XAI systems,
due to prevailing regulations, in the financial industry.
While there is research dealing with AI in Finance, from a more technological
perspective in IS and CS, or XAI in general, there is no paper reviewing the current
state of research on XAI in Finance in leading international journals and conferences
(Arrieta et al. 2019). Searching for related research, we were only able to find quali-
tative literature reviews. These include dealing with aspects of the trustworthiness of
AI employment in systemic risk assessment (Daníelsson et al. 2021), deep learning
1
Note, that this does not decrease regulatory compliance requirements (e.g., transparency, account-
ability) themselves. The decrease affects the burdens imposed by the requirements on the private sector
through harmonization and standardized business reporting.
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P. Weber et al.
and anti-money laundering as a combination of a specific XAI method with a spe-

cific area in Finance (Kute et al. 2021), the design of smart markets, that, by using
computational tools, help human decision-makers make real-time decisions in com-
plex trading environments (Bichler et al. 2010), or banking in general (Burgt 2020).
With our study presenting a systematic literature review (SLR), we follow calls for
further research from the academic community concerning the compliance behavior
in highly-regulated application domains such as Finance and how researchers, prac-
titioners, and regulators should react to recent developments in AI and XAI (Ciatto
et al. 2020). The need for this research is deepened by practitioners agreeing on the
necessity of trustworthiness of AI in Finance, which is achievable through explain-
ability (IEEE 2021). Besides, regulators in many countries demand greater transpar-
ency and explainability of decisions in the financial sector by requiring XAI rather
than AI-based systems (Kalyanathaya 2022). Accordingly, we advance research and
practice by reviewing relevant Finance, IS, and CS literature and performing an SLR
to aggregate yet disorganized research on XAI in Finance.
With the paper at hand, we contribute to academia’s emerging interest in XAI
in Finance research in different dimensions. First, our research offers guidance for
scientists to understand the growing emphasis on XAI in Finance research that we
also found in other domains (Wells and Bednarz 2021; Islam et al. 2022). Second,
when taking a closer look at the goals these research endeavors and the application
of XAI in practice try to achieve, we confirm an imbalance already highlighted by
prior research (e.g., Arrieta et al. 2019). Third, scientists looking for the distribution
of a specific XAI method in Finance may find answers in our results, as we provide
an overview of current research on XAI, especially in Finance. As our final set of
articles reveals, only a few papers deal with whether the developed or applied XAI
methods meet regulatory requirements (except for, e.g., Park et al. 2021). This is a
prerequisite for the implementation in practice, thus highlighting a critical future
research avenue.
Practitioners, such as legislators, regulators, and Finance managers, benefit from
our research, as we provide basics of XAI methods employed in Finance, a yet dis-
persed research area. Looking for existing XAI applications in their specific Finance
areas, Finance managers may consult our study to learn about ready-to-employ solu-
tions to add transparency to their AI-based systems. Alternatively, existing knowl-
edge about XAI models and possible application scenarios in the company can be
matched. Practitioners can use our study to gain a quick overview of already accept-
able methods from a regulatory point of view. Policymakers may respond to the
shift from transparent models to post-hoc explainability by designing corresponding
laws and regulatory requirements. Finally, practitioners may infer trends in XAI in
Finance to prepare their employees for future challenges through specialized XAI
trainings.
The remainder of this study is structured as follows. Next, we present a section
about related literature introducing the areas of AI and XAI on the one hand and
the Finance domain (i.e., technological influences and areas where AI and XAI are
applicable) on the other. In this way, we establish common ground for the character-
istics of different XAI models, reconvene why the explainability of AI is crucial for
decision-making, describe the main concepts of how to achieve it, and introduce the
13
possibilities for usage of (X)AI-based systems in Finance. Then, we give an over-

view of our research method, followed by a presentation of our results. We conclude
with a discussion of the theoretical and managerial implications of our research next
to limitations and avenues for future research.
2 Related literature
2.1 Artificial Intelligence
AI is a key technology of the 21st century which is applied in various areas, e.g.,
search engines, voice recognition, and interactive interpreters (Russell et al. 2016).
Starting from the mid of last century (McCarthy et al. 1955), benefiting from Big
Data, cheap computing power and storage, and improved algorithms, AI faces
unseen opportunities nowadays. It is expected to largely change society through pro-
ductivity-enhancing automation and job replacement.2
In research, AI is considered a subarea of Computer Science (CS) (Shapiro
1992). Still, consensus lacks a single AI definition, as intelligence itself is not ade-
quately defined (Legg and Hutter 2007; Rzepka and Berger 2018). Thus, there are
numerous definitions of AI. The founders of AI gave the first definition as “making
a machine behave in ways that would be called intelligent if a human were so behav-
ing” (McCarthy et al. 1955, p. 11). More recently, Russell et al. (2016) systematized
eight currently discussed definitions by seeking human intelligence or rationality
and focusing on either thinking or acting. Recent definitions emphasize intelligent
agents interacting with their environment and pre-set goals (Russell et al. 2016). AI
is also influenced by other disciplines (Shapiro 1992), e.g., mathematics, economics,
and psychology (Russell et al. 2016).
Although there is a plethora of AI research (e.g., Abdel-Karim et al. 2021; Cao
2020, 2022; Goodell et al. 2021; Martin 2019; Rai et al. 2019; Zheng et al. 2019),
practical implementation lags due to the so-called black-box nature of most AI-
based systems, thus missing to unlock the full potential of AI implementation. The
black-box nature refers to a lack of explainability and interpretability of AI-based
systems, primarily arising from the opacity of many of today’s AI-based systems.
Hence, the nature of inputs and outputs can be observed and understood chiefly,
but not the exact processing steps in between—the black box. Accordingly, users
or programmers of these systems cannot determine what influence which variable
had on the decision or how this decision arose from the input variables. This is dif-
ficult for traceability, which is partly mandatory for regulatory purposes, but also
the trust in such systems. XAI, a sub-class of AI systems, counteracts the general
black-box nature of AI-based systems (Doran et al. 2017; Rosenfeld and Richardson
2019; Arrieta et al. 2019; Ciatto et al. 2020; Sanneman and Shah 2020; Verhagen
et al. 2021).
2
For further information see Russell et al. (2016).
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P. Weber et al.
2.2 Explainable Artificial Intelligence
In our work, we follow the definition of XAI given by Arrieta et al. (2019), that
states as follows: “Given an audience, an explainable Artificial Intelligence is one
that produces details or reasons to make its functioning clear or easy to under-
stand.” (Arrieta et al. 2019, p. 6). Thereby, we impose ease of understanding of AI
for humans and use targeted explanation techniques such as XAI. In general, we
can view explainability as a vital attribute of AI models, which indicates any pro-
cedure that intends to clarify its inner workings. This is predominantly known as
understandability in the XAI literature and denotes specifically the model charac-
teristics that help a human understand how the AI system works (Montavon et al.
2018). Additionally, this is tied to interpretability, which we can define as the ability
to provide a model with meaning in understandable terms to humans through, e.g.,
transparency, if an AI model is by itself understandable. Thus, explainability is two-
fold, leading to model explainability, i.e., the ability of the system to reveal its inner
workings, and human understandability, i.e., the capability of humans to understand
the factors and the knowledge contained within an AI model. Employing XAI can
lead to increased trust, e.g., by consumers and employees, and accountability in
deployed AI models (Rai et al. 2019; Martin 2019; Elliott et al. 2021). Increased
trust ultimately results in more widespread adoption of AI applications (Adadi and
Berrada 2018; Janiesch et al. 2021; Mirbabaie et al. 2021; Sigrist and Hirnschall
2019). Especially in highly-regulated application domains or in environments with
highly consequential decisions—like Finance, Healthcare, and Automotive—this
requirement can be crucial for a successful application. Nevertheless, these indus-
tries are predestined for the application of AI systems due to the vast amounts of
available data and automatable processes. In this vein, the need for XAI emerged, as
it supports the evaluation and justification of AI systems (Zheng et al. 2019; Meske
et al. 2022). Recent calls for, e.g., trustworthy (Thiebes et al. 2021) or sustainable
AI (Bawack et al. 2022) underline the need for an exaggerated concept of AI.
Next to defining XAI, it is essential to reconvene various goals of explainability
of AI evolved from the literature. In general, all these goals help to understand why
the explainability of AI is needed and performed, especially when acting in a highly-
regulated application domain such as Finance (Cao 2022). Thus, we follow an estab-
lished nomenclature of XAI goals (Arrieta et al. 2019) and include the following
nine goals: trustworthiness, causality, transferability, informativeness, confidence,
fairness, accessibility, interactivity, and privacy awareness. These goals, presented
in Table 1, relate to what XAI aspires to compel.
Finally, it is crucial to inspect how we can achieve explainability. The first impor-
tant distinction is between understandable models by design and so-called black-
box models, which require external XAI techniques to enable human understand-
ing. Thus, we differentiate between transparent models and post-hoc explanation
techniques.3
3
For further information and an explanation of each of the models see Arrieta et al. (2019).
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Table 1 Goals of XAI based on Arrieta et al. (2019)

XAI goals Description of the goal
Trustworthiness Trustworthiness refers to the degree of confidence a model will react as expected
when opposing a specific problem.
Causality Causality among data variables means finding cause-effect relationships leading to
higher model comprehensiveness.
Transferability Transferability deals with uncovering boundary constraints of models to better assess
their applicability in other cases.
Informativeness Informativeness is concerned with the distinction between the original human
decision-making problem and the problem solved by a given model, including its
inner mechanisms.
Confidence Confidence describes the robustness and stability of a model, including its working
regime.
Fairness Fairness tries to prohibit the unfair or unethical use of model results and outputs by
ethical analysis and illumination of results affecting relations.
Accessibility Accessibility refers to the involvement of (non-technical) end users in the AI mod-
eling process.
Interactivity Interactivity deals with the level of interaction between end users and XAI models to
improve the latter.
Privacy awareness Privacy awareness is about enlightening possible privacy breaches by informing
users.
Transparent models must satisfy specific properties to be explainable to decision-

makers. First, they are decomposable in that each part is fully explainable or inter-
pretable by design, e.g., input parameters or computations. For instance, complex
and non-interpretable input features would fail this criterion, making an AI model
less understandable (Lou et al. 2012). Second, transparent models should satisfy
algorithmic transparency, i.e., a decision-maker’s need to understand the process of
the model to produce its output derived from its inputs. Thus, the decision-maker
knows how the model would react in any given situation. Commonly used transpar-
ent models are linear/logistic regression, decision trees, k-nearest neighbors, rule-
based learners, general additive models, or Bayesian models.3 To give an example,
decision trees consist of a hierarchical structure for decision-making, primarily sup-
porting classification problems. Decision trees display different features and feature
values on each tree level. Generally, they are easy to understand for a human deci-
sion-maker as they easily represent input features and the output variable. Figure 1
provides an exemplary decision tree for forecasting bank loans loss-given-default.
The tree reflects a recovery horizon of 24 months and estimates the expected recov-
ery rate (RR), depending on features like the loan size (Debt) and the age of the cli-
ent’s relationship with the bank (AoR) measured in months.
When AI models do not satisfy the properties of transparent models, post-hoc
explainability methods come into place. These methods provide interpretable infor-
mation for decision-makers to understand the AI model’s process of producing
its output for a given input. The literature (e.g., Arrieta et al. 2019) distinguishes
between two different post-hoc explainability methods: model-agnostic and model-
specific.3 Model-agnostic methods can be applied to any given AI model. Such
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P. Weber et al.
Fig. 1 Example decision tree

(Bastos 2010, p. 2514)
Fig. 2 Example ICE plot

(Fernández 2020, p. 145)
methods can be classified into three categories: explanation by simplification, fea-

ture relevance explanation, and visual explanation. One example of explanation by
simplification is local explanation techniques such as Local Interpretable Model-
Agnostic Explanations (LIME) and all its variants. LIME is a rule extraction tech-
nique and builds locally linear models around the prediction of the model that it tries
to explain (Ribeiro et al. 2016). Other well-known model-agnostic techniques, such
as Shapley Additive explanations (SHAP), fall within the feature relevance expla-
nation. With SHAP, the authors offer a way to measure the influence of relevant
input features by calculating a feature importance score for each particular predic-
tion (Lundberg and Lee 2017). Although LIME and SHAP may be visualized, it
is not their defining characteristic, leading to the third category: visualization tech-
niques such as Individual Conditional Expectation (ICE) (Goldstein et al. 2015).
ICE allows graphing the functional relationship between the predicted response and
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the feature for individual observations. For instance, Fernández (2020) predicts bank
solvency in the United States and uses ICE plots for sensitivity analysis. Figure 2
shows the individual observations, plotting the mortgage rate on the x-axis and the
bank solvency (measured as the level of regulatory capital among risk-weighted
assets) on the y-axis. From here, one can deduce two breakpoints in solvency: With
rising mortgage rates, there are two drops in bank solvency, one at mortgage rates of
5% and the other at about 8.5%.
These techniques help visualize the model parameters of any supervised AI
algorithm. However, visualizations are less common model-agnostic explanation
techniques since ensuring their applicability to any AI model’s inner structure is
challenging.
Model-specific methods can only be applied to their respective category of AI
models such as, e.g., ensembles and multiple classifier systems, support vector
machines (SVMs), and neural networks.3 For the latter, simplification techniques
like DeepLIFT compute importance scores for multi-layer neural networks. With
this approach, one can compare various neuron activations to a reference activation
and assign a score based on the computed difference (Shrikumar et al. 2017).
2.3 Technological advances in Finance
Finance is a broad field of applications with very diverse requirements for technical
systems and automation, mainly due to regulatory and legal requirements. Still, the
domain continuously uses and adapts to new technological opportunities (Gimpel
et al. 2018; Zheng et al. 2019), like AI and XAI. This phenomenon is also referred to
as FinTech, i.e., financial technology. Previously, research emphasized the applica-
tion of AI in Finance (e.g., Cao 2020, 2022; Goodell et al. 2021; Zheng et al. 2019).
Cao (2020, 2022) evaluates the challenges of financial businesses and provides a
comprehensive overview of solutions through classic and modern AI in Finance and
economics. Goodell et al. (2021) present a holistic retrospection of the extant lit-
erature on AI application in Finance through co-citation and bibliometric-coupling
analyses of 283 articles for the last three decades. They derive the following the-
matic clusters: financial distress and corporate failure, algorithmic and high-fre-
quency trading, forecasting and predictive analysis, text mining and sentiment anal-
ysis, financial fraud, pricing and valuation, scheduling, and investor behavior and
trade classification. Zheng et al. (2019) specifically analyze financial intelligence,
which they define as FinTech 3.0, i.e., the third stage of technological advancements
in Finance after computers (FinTech 1.0) and the internet (FinTech 2.0). Financial
intelligence achieves “intelligent and accurate calculation responsibility and (…)
lead[s] the overall change in the financial industry” (Zheng et al. 2019, p. 914).
They describe the AI key application areas of wealth management, risk manage-
ment, financial security, financial consulting, and blockchain. While there is a con-
siderable amount of publications aggregating research on AI in Finance, there is no
paper reviewing the current state of research on XAI in Finance. Due to the high
regulations applying to domains like Finance and practical requirements, e.g., for the
transparency of decisions, XAI can play a decisive role in augmenting processes in
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such domains. Hence, it is necessary to discuss XAI related to the different applica-
tion areas in Finance. Research divides Finance into several areas (e.g., Huang et al.
2020; Hentzen et al. 2021; Goodell et al. 2021). Particularly pivotal and commonly
discussed for AI deployment are the Finance areas of risk management, stock mar-
ket, portfolio optimization, anti-money laundering, and electronic financial transac-
tion classification.
Risk management (e.g., default and bankruptcy prediction, fraud detection)
is concerned with identifying, measuring, and controlling financial risks (Zheng
et al. 2019). Financial institutions continuously perform it, and regulators require
it (Adams and Hagras 2020). Default and bankruptcy prediction refers to a state of
(corporate) failure (Sigrist and Hirnschall 2019). Default prediction is concerned
with predicting the probability of debtors, e.g., credit card holders and financial
institutions, to commit default using available information, e.g., profiles, loan his-
tory, and repayment history. Bankruptcy prediction deals with publicly available
information and derives, e.g., accounting ratios to determine the likelihood of a
company going bankrupt, a valuable information for potential investors and cur-
rent creditors (Sigrist and Hirnschall 2019; Zheng et al. 2019). Fraud detection
involves uncovering unauthorized (fraudulent) transactions on accounts (Jarovsky
et al. 2018). AI methods support these endeavors by assessing numerous cases, e.g.,
credit card applications, or enormous amounts of available data, e.g., in the case of
public companies, and suggesting possible actions, like approving or denying credit
card applications or loans. XAI complements these suggestions with explanations
to ensure they are discrimination-free and thoroughly founded, rendering the AI
methods usable in the industry (Park et al. 2021). More precisely, in the case of
default prediction, e.g., a gradient tree-boosted model may get employed (Sigrist and
Hirnschall 2019). This model performs a binary classification by assigning loans to
small and medium-sized enterprises into two categories: defaults and non-defaults.
Among approximately 50 different predictor variables, this AI model uses the num-
ber of days of delay until repayment (delay days) to predict rare events, such as loan
defaults. Here, the authors introduce two model-agnostic post-hoc explainability
tools for the interpretation of the AI model (i.e., two XAI models): variable impor-
tance measures (feature relevance explanation) and partial dependence plots (visual
explanation). Variable importance measures quantify and illustrate single variables’
importance for the prediction (Sigrist and Hirnschall 2019). Further, partial depend-
ence plots (see Fig. 3) visualize the model by showing how a single variable influ-
ences the prediction outcome aggregated for several observations. For instance, plot-
ting the age of the accounting data provided by a company (age accounting data) or
the delay days against default probability illustrates the model. As Fig. 3 shows, a
lower age accounting data and fewer delay days are related to a lower default prob-
ability. Additionally, the linear relationship in the case of age accounting data and
the non-linear relationship in the case of delay days is recognizable. These illustra-
tions help overcoming the black-box nature of AI-based systems.
Trading in the stock market benefits from AI usage, as the latter is expected to
impede emotionally, and thus irrational, investment decisions and find patterns
beyond human recognizability (Ferreira et al. 2021). Price prediction estimates the
future value of a specific stock, option, or index. To achieve this, human and AI
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Fig. 3 Example partial dependence plots (Sigrist and Hirnschall 2019, p. 28)
predictors use various input factors from within the stock market, e.g., past prices
and trading volumes, and outside of it, e.g., press releases, annual reports, and social
media (Ito et al. 2021). XAI supports this automated process by delivering explana-
tions to highlight on which specific input variables investment decisions or price
predictions are based. To give another example of the application of XAI from the
area of trading in the stock market, we closer inspect technical analysts. They rely
in their trading strategies on historical charts and heuristic approaches, trying to
extrapolate future asset prices, as opposed to fundamentalists, who strictly base their
trading behavior on asset prices derived from efficient market hypothesis’ fundamen-
tal values (Brock and Hommes 1998). Technical analysts’ behavior provides ground
for applying reinforcement learning to retrieve the used “rules-of-thumb” (rule-base
learners). This refers to determining “the amount of relevant historical information
as well as the optimal parameters of the technical rules employed” (Bekiros 2010,
p. 1154), as a common problem discussed with the technical analysts’ approach is
the lack thereof. Here, using AI that is by design interpretable, as its outcome con-
sists of parameters of fuzzy inference rules (transparent XAI model), supports the
cause of XAI (Bekiros 2010).
Portfolio optimization deals with asset allocation, which is considered one of
the most relevant research fields in asset management (Zhang et al. 2020a). It refers
to finding a set of investment assets that fulfills the needs of a particular investor
while usually simultaneously maximizing a particular goal (Ferreira et al. 2021).
Advanced models allow investors to include their expectations and confidence level,
while Big Data enables the incorporation of, e.g., market sentiments or other mac-
roeconomic factors such as gross domestic product growth or inflation (Zhu et al.
2020). AI models help solve this complex problem by automatically deriving con-
clusions from these large amounts of data with multiple input variables. At the same
time, XAI adds interpretability to these conclusions, e.g., a portfolio output, to nar-
row down the relevant factors for specific asset allocations.
Money laundering refers to techniques of “hiding proceeds of crime” (Levi
and Reuter 2006, p. 289). Anti-money laundering measures are, e.g., know-your-
customer requirements that ensure that banks verify their customers’ identity by
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checking government-issued IDs. The application of AI models may improve this

process by handling large amounts of data and detecting anomalies, thus revealing
potential money laundering cases. However, as money laundering suspicions can
prevent customers from financial transactions, interpretability in the form of XAI
for these automatically generated suspicions is needed (Kute et al. 2021). The mere
results of an AI model are not sufficient in this case. Instead, explanations for the
decisions are crucial.
Electronic financial transaction classification is concerned with classifying trans-
actions that bank account holders perform into categories, e.g., groceries or trans-
portation (Maree et al. 2020). While less regulated than others, this area is of pivotal
importance for AI applications in Finance. Hence, we include this area in our con-
sideration. Financial institutions may use this classification to present value-adding
products to customers like digital financial advisors. Individuals’ electronic financial
transactions are highly personal (Achituve et al. 2019). Thus, applications based on
these transactions include the risk of privacy intrusions and discrimination. Misclas-
sification of transactions could also impede the usability, and thus profitability, of a
digital financial advisor, which determines the need for explainability.
To sum up, Finance is a highly-regulated application domain with a tremendous
need for explanations when employing AI techniques (Zheng et al. 2019). Regula-
tors and supervisors require banks to illuminate their activities when using AI (Burgt
2020; Weber et al. 2020; Adams and Hagras 2020), hence requiring the deployment
of XAI models in specific application scenarios.
3 Method
The conducted SLR aims to provide a comprehensive overview of previously dis-

persed research and a research agenda for XAI in Finance. This contributes to the
goal of anchoring and facilitating XAI usage in the financial sector, thereby advanc-
ing theory and practice alike. In the following, we describe the methodology and
employed search strategy for our SLR.
SLRs present the current state of research on a particular topic by aggregating
prior research results. In this vein, SLRs also uncover less researched areas of the
topic under investigation (e.g., Kitchenham et al. 2011; Okoli and Schabram 2010;
Snyder 2019). Consequently, SLRs aim to aggregate the extracted research out-
comes of previously conducted studies and their propositions (Okoli and Schabram
2010; Kitchenham et al. 2011). Thus, SLRs cluster the current state of research
according to predefined criteria and thereby contribute to the conceptualization of
the topic under investigation (Paré et al. 2015; Snyder 2019). Derived results of an
SLR target researchers and practitioners (Kitchenham et al. 2011; van Aaken and
Buchner 2020). Researchers benefit from a comprehensive overview of previous
research and the developed future avenues for research, whereas practitioners can
employ the derived overview as a guideline for their operations (Kitchenham et al.
2011; Snyder 2019).
We designed our SLR according to well-established guidelines in IS research,
specifically those by Kitchenham (2004). By following these guidelines, we ensured
13
Table 2 Search terms used

Domain Keywords
Explainability “Transparen*” or “explain*” or “explanat*” or “interpret*” or “black box” or

“white box”
AI Implementation “Artificial intelligence” or “machine learning” or “natural language processing” or
“data mining” or “data science” or “text mining”
Finance “Financ*” or “banking” or “trading” or “credit scoring” or “money laundering”
Note This study employs wildcards (*) and Boolean operators in the search terms. The final search term
consists of the three domain keyword sets connected with the Boolean operator “AND”
a transparent and reproducible process, providing trustable, reliable, and rigorous

research outcomes. Besides, we employed a detailed review protocol to ensure fur-
ther transparency and reproducibility. The review protocol covered the whole pro-
cess from conceptualization to the actual search and evaluation of results. It pro-
vided detailed information on the conducted search, inclusion and exclusion criteria,
search strategy, and analysis procedure.
The initial search for articles employed three search term domains connected by
the operator “AND” to ensure the fit with the topic under investigation. One domain
aimed at explainability, one fostered AI implementation, and a third one ensured
the applicability to the financial domain (see Table 2). This helped us to limit the
number of retrieved articles and ensured the relevance of the derived studies. We
searched the title and abstract for the chosen search terms to provide a broad set of
relevant prior research. Nevertheless, an SLR does not aim at providing an exhaus-
tive overview of prior research on a particular topic but rather guidance on the previ-
ously conducted research. Summing up, the search focused on publications address-
ing XAI in the financial context while excluding prior research emphasizing AI or
other application scenarios (e.g., Healthcare, Automotive).
In order to do justice to the topic at hand, we included the top-ranked (A + and
A) Finance journals according to the German Academic Association of Business
Research (VHB) in the search. Further, we included the eight Information Systems
(IS) basket journals (i.e., European Journal of Information Systems, Information
Systems Journal, Information Systems Research, Journal of AIS, Journal of Infor-
mation Technology, Journal of MIS, Journal of Strategic Information Systems, MIS
Quarterly), and the top CS journals according to the Scimagor Journal Ranking. We
included CS as a research area to capture a more technical angle to the topic and IS
as research on the intersection of technology and practical implementation. Besides,
the search process also covered several databases (i.e., ACM Digital Library, AIS
eLibrary, IEEE Xplore) related to IS and CS research to provide an extensive over-
view of current research findings, thus following similar SLRs (e.g., Bouncken
et al. 2015; Sageder et al. 2018; Malinova and Mendling 2021). We included peer-
reviewed publications in leading international journals and conference proceedings
to ensure high-quality standards. Besides, we limited the search to publications since
2010 to provide a more recent overview of current research in a rapidly changing
environment of XAI research endeavors. The same search strategy (i.e., search terms
13
P. Weber et al.
Fig. 4 Visualization of the SLR process
and criteria) is independently applied to each outlet and database. The search took
place from October 2021 to January 2022 to provide the most recent picture of cur-
rent research, up to and including the year 2021. The initial search yielded 2,022
results. Upon excluding duplicates, the set consisted of 2,000 results. Figure 4 visu-
alizes the steps of our SLR process and provides additional information on the par-
ticular quantities (i.e., initially, 545 results from Finance, 870 results from IS, and
607 results from CS).
The screening process employed a set of exclusion criteria to ensure the relevance
of the results and the focus on the research goal. Besides publication date and focus
13
on peer-reviewed outlets, we defined the following rigid exclusion criteria4 to filter

out irrelevant publications:
• The paper deals with Finance but not with XAI.

• The paper deals with XAI but not with Finance.
• The paper deals with AI and Finance but not with XAI.
The screening process consisted of several steps. First, we checked the result set
for relevance to the research project and the criteria utilizing their titles, abstracts,
and keywords. In questionable cases, we also screened additional publication sec-
tions like the introduction and conclusion. We excluded all articles with a misfit
concerning research goals and search criteria, in our case, 1,757 publications. This
led to 243 publications relevant to the following screening step. Within the next
step, we evaluated these publications in detail according to their full texts. Fifty-four
publications finally matched the search criteria and research goals. The far-reaching
search caused relatively high exclusion rates during the process. However, conduct-
ing a more comprehensive search was necessary to provide an overview of the inter-
section of XAI and Finance. After screening the derived publications for relevance,
we browsed these retained publications for key publications (i.e., backward search).
The backward search yielded another six relevant publications. Hence, the final set
featured a total of 60 articles (see Appendix 1 for the complete list).
The last step of the SLR covered the coding of the final publication set. We coded
according to publication details (i.e., publication, year, methodology) and the the-
matic focus and application (i.e., XAI method and goal, area of Finance). To the
best of our knowledge, no suitable coding scheme is available. Thus, we developed a
multiple classification-coding scheme (i.e., coders can assign one publication to sev-
eral classifications). The developed coding scheme spanned a matrix that connects
the XAI application and the area of Finance (according to the presented nomencla-
tures). However, the developed coding scheme should ensure an iterative, discursive
process instead of being a rigid scheme. Three coders independently performed the
coding, discussing possible deviations and settling them in mutual agreement.
4 Results
4.1 General overview
We present the publication trend of XAI research in Finance in Fig. 5. The graph
shows the number of articles published in the respective year. Figure 5 indicates
that XAI research in Finance was already relevant a decade ago, followed by a pau-
city around 2013 and 2014. We find the most articles for 2020 with n = 17 articles,
followed by 2021 with the second-most n = 16 articles. Thus, the two recent years
4
We applied these criteria in each of the screening steps to ensure the consistent pursuing of the
research goal.
13
P. Weber et al.
Fig. 5 Publication trend of XAI 17

16
research in Finance (n = 60)
Number of Arcle(s)
8
6
4
3
2 2
1 1
0 0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Year
Fig. 6 Methodological overview Algorithm Case Study, 2

of XAI research in Finance Review, 3
(n = 60) Algorithm
Demonstraon, 3
Qualitave
Literature
Review, 2
Theorecal
Model + Real
Market
Datasets, 32
Experiment, 18
account for over 55% of the articles we found, indicating this research area to be of
considerable growth. We assume this to manifest the current AI and XAI trend in
research (Collins et al. 2021), e. g. due to rising transparency needs by policymak-
ers, we also find in other domains regarding XAI (Wells and Bednarz 2021; Islam
et al. 2022).
In Fig. 6, we provide an overview of the methods used in XAI research in
Finance.5 The majority of the reviewed articles present theoretical models, which
are subsequently applied to real market datasets (n = 32). For instance, Liu et al.
(2021) propose a logistic regression model empowered with cross-features gener-
ated through deep neural networks, which they apply to multiple public and business
5
We chose to include qualitative literature reviews in our sample, as it presents a broader picture of the
relevant literature. Also, in this, we follow other SLRs (e.g., Bouncken et al. 2015; Sageder et al. 2018;
Malinova and Mendling 2021).
13
Fig. 7 Overview of publication
disciplines, forms, and ratings
(n = 60)
datasets from real-world credit risk assessment applications. The runner-up method
is the experiment performed by n = 18 articles in our subset. For instance, Ghandar
and Michalewicz (2011) experiment with multi-objective evolutionary algorithms
for stock price prediction to pursue the XAI goals of informativeness and confi-
dence. Least used are the methods of qualitative literature review and case study,
which are only employed by two research teams each, e.g., a case study by Mayer
et al. (2020), who conduct an in-depth case study of a large German bank imple-
menting an AI system supporting credit risk decisions.
We figure this focus on theoretical models with real market datasets and experi-
ments to be an expression of the data-driven characteristic of AI and, subsequently,
XAI. Most researchers employed either real or experiment-crafted datasets to pre-
sent their XAI-related results in Finance. This adds to the practical applicability of
the study at hand, as it shows Finance practitioners that XAI is already well-con-
nected to, e.g., real market datasets and is thus more readily available for implemen-
tation in their specific Finance areas.
We find an imbalance in the disciplines from which the reviewed research articles
originated. As Fig. 7 shows in the first bar, roughly a quarter (n = 13) of the sam-
ple is published in Finance literature such as the Journal of Banking and Finance,
while the majority (n = 47) is based in the IS and CS disciplines with research out-
lets like Information Systems Research. This paucity of XAI research in Finance
literature we found in our sample fosters further inspection. We conclude there is
a further need for the Finance discipline to engage with research on XAI due to
the specific requirements of this industry for such systems. Accordingly, it is insuf-
ficient if only more technically oriented disciplines, i.e., IS and CS, deal with it.
Instead, the view of the application-specific discipline, i.e., Finance, is also valu-
able and essential. Besides, due to high regulatory requirements in this industry, law
researchers should respond to law initiatives and laws such as the US FTA, the EU
AIA, and the GDPR next to scientific calls for transparency in Finance (Vishwanath
and Kaufmann 1999; Pasquale 2015; Weber et al. 2020) and deepen their research
on XAI in regulated domains. We find a balanced distribution by looking at the pub-
lication form the authors in our subsample chose. Half of the articles were published
in journals (n = 28), while the other half were introduced at conferences (n = 32), as
13
P. Weber et al.
the second bar of Fig. 7 shows. This balance implies that XAI in Finance is an estab-
lished research field future scientists might want to look at, as it is well-represented
in both research trends capturing conferences and basic research advancing journals.
In the lower bar of Fig. 7, we can see the distribution of the rankings the respective
publication outlets received. We adopt the rating provided by the VHB, ranking out-
lets from A + (best quality and impact) to D (lower quality and impact), considering
all discipline ratings.6 We find only one article with the highest rank A + , while
a fifth of our subsample’s articles were published in outlets receiving the second-
best rank, A (n = 11). Interestingly, researchers publish most articles in journals or
conference proceedings that received no rating (n.r.) by the VHB (n = 45). This fact
may show that XAI in Finance is yet predominantly concerned with an application
point of view, thus, possibly neglecting the theory-building and development part
of research that could further pave the way for realizing the full potential of XAI in
Finance. Additionally, research is driven by non-management disciplines such as IS
and CS.
4.2 Overview concerning XAI goals and methods
We research which goals XAI in our subsample pursuits. For this purpose, our cod-
ing scheme grounds on the well-accepted nomenclature of XAI goals by Arrieta
et al. (2019) and considers the nine goals of XAI mentioned above: trustworthiness,
causality, transferability, informativeness, confidence, fairness, accessibility, inter-
activity, and privacy awareness. Table 3 provides an overview of the respective arti-
cles dealing with specific XAI goals. As the literature indicates (e.g., Arrieta et al.
2019), most XAI papers deal with the goal of informativeness, while the least deal
with privacy awareness. We confirm these results for our sample of papers. Most of
our sample (n = 43) deals with informativeness, while only two articles target the
XAI goal of privacy awareness. This paucity of research with the goal of privacy
awareness is somewhat interesting, as laws, e.g., the GDPR, emphasize privacy and
the right to informational self-determination, especially in industries like the finan-
cial sector. Future research has to unravel this mismatch and identify potential rea-
sons for it.
Next to the goals of XAI, we take a closer look at the XAI methods used in the
reviewed sample. As for the list of XAI goals, we base our coding of XAI methods
on prior literature (e.g., Arrieta et al. 2019). We distinguish between transparent AI
models, which are interpretable without any further additions, and so-called post-
hoc explainability, which complements existing AI models to create or improve their
interpretability. For the latter, there is model-agnostic explainability on the one side,
providing explainability regardless of the model, and model-specific explainability
on the other, which improves explainability for distinct AI models (Arrieta et al.
2019).
6
https://vhbonline.org/en/vhb4you/vhb-jourqual/vhb-jourqual-3/complete-list.
13
Table 3 Overview of XAI in Finance papers dealing with specific XAI goals (n = 60)
XAI goal Count Articles
Trustworthiness 10 Ariza-Garzón et al. (2020); Zheng et al. (2020); Attanasio et al. (2020); Kong et al. (2020); Maree et al. (2020);
Wang et al. (2020); Kute et al. (2021); Daníelsson et al. (2021); Lusinga et al. (2021); Ge et al. (2021)
Causality 6 Bastos (2010); Ariza-Garzón et al. (2020); Kraus et al. (2020); Schnaubelt et al. (2020); Kong et al. (2020);
Cheong et al. (2021)
Transferability 11 Bastos (2010); Kim et al. (2011); Jarovsky et al. (2018); Horel et al. (2018); Zhang et al. (2019); Oppold and
Herschel (2019); Ariza-Garzón et al. (2020); Zheng et al. (2020); Kong et al. (2020); Carta et al. (2021); Liu
et al. (2021)
Informativeness 42 Bekiros (2010); Kamalloo and Abadeh (2010); Ghandar and Michalewicz (2011); Chen et al. (2012); Hayashi
et al. (2015); Duan and Zeng (2015); Butaru et al. (2016); Xu et al. (2017); Yang et al. (2018); Li et al.
(2018); Rajab and Sharma (2019); Sigrist and Hirnschall (2019); Shi et al. (2019); Zhang et al. (2020a);
Zhang et al. (2020b); Zhang et al. (2019); Chou (2019); Achituve et al. (2019); Oppold and Herschel (2019);
Cong et al. (2020); Kraus et al. (2020); Mayer et al. (2020); Rosati et al. (2020); Schnaubelt et al. (2020);
Adams and Hagras (2020); Dattachaudhuri et al. (2020a, b); Kong et al. (2020); Maree et al. (2020); Wang
et al. (2020); Zhu et al. (2020); Carta et al. (2021); Cheong et al. (2021); Dastile and Celik (2021); Ferdaus
et al. (2021); Kute et al. (2021); Park et al. (2021); Ito et al. (2021); Guo et al. (2021); Mariotti et al. (2021);
Lusinga et al. (2021); Ge et al. (2021)

Confidence 30 Bekiros (2010); Khandani et al. (2010); Ghandar and Michalewicz (2011); Hayashi et al. (2015); Xu et al.
(2017); Renault (2017); Li et al. (2018); Horel et al. (2018); Rajab and Sharma (2019); Zhang et al. (2020b);
Zhang et al. (2019); Chou (2019); Achituve et al. (2019); Oppold and Herschel (2019); Wu and Yan (2019);
Ariza-Garzón et al. (2020); Cong et al. (2020); Rosati et al. (2020); Zheng et al. (2020); Attanasio et al.
(2020); Adams and Hagras (2020); Dattachaudhuri et al. (2020a, b); Kong et al. (2020); Dastile and Celik
(2021); Ferdaus et al. (2021); Kute et al. (2021); Guo et al. (2021); Liu et al. (2021); Nian et al. (2021)
Fairness 9 Mayer et al. (2020); Adams and Hagras (2020); Koshiyama et al. (2020); Maree et al. (2020); Kute et al.
(2021); Park et al. (2021); Mariotti et al. (2021); Daníelsson et al. (2021); Lusinga et al. (2021)
Accessibility 5 Hayashi et al. (2015); Duan and Zeng (2015); Alam et al. (2020); Rosati et al. (2020); Attanasio et al. (2020)
Interactivity 6 Kamalloo and Abadeh (2010); Horel et al. (2018); Shi et al. (2019); Rosati et al. (2020); Cheong et al. (2021);
Ge et al. (2021)
Privacy awareness 2 Maree et al. (2020); Kute et al. (2021)
13
P. Weber et al.
Fig. 8 Publication trend of XAI 12

research in Finance regarding
transparent models and post-hoc 10
Number of Arcle(s)
explainability (n = 60)
8
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Transparent Models Post-Hoc Explainability
Table 4 provides an overview of the reviewed articles and their XAI methods.
Multi-method usage is possible, while six papers do not employ methods (Ghandar
and Michalewicz 2011; Renault 2017; Oppold and Herschel 2019; Koshiyama et al.
2020; Daníelsson et al. 2021; Ge et al. 2021), but only deal with XAI from a high-
level perspective considering goals. Thus, they are not included in Table 4 but in
Table 3. The results indicate that roughly the same number of papers use transparent
models (n = 26) or introduce XAI in the form of post-hoc explainability (n = 32).
This balance represents researchers’ balanced preferences towards both kinds of
XAI, transparent models next to post-hoc explainability, highlighting XAI in Finance
as a well-recognized, established research stream. Additionally, we observe articles
employing both kinds of XAI, thus comparing, e.g., neural networks and logistic
regression (Adams and Hagras 2020), showing academia targeting both kinds of
XAI individually and their combination and comparison. Decision trees are the most
used method (n = 12) when only looking at transparent models, while general addi-
tive and Bayesian models are not used. Related studies (e.g., Arrieta et al. 2019;
Chou 2019) confirm decision trees to be well-employed in XAI research, but we find
a different picture regarding general additive models. Relevant research concerning
XAI in the form of general additive models in Finance (Berg 2007; Taylan et al.
2007; Calabrese 2012) did not appear in our search. This fact eventually hints at pos-
sible limitations of this study and sparks further research as to why there has been
no research on general additive models in Finance in top-tiered outlets since 2010.
Looking at methods including post-hoc explainability (n = 37), we find roughly two-
fifths being model-agnostic (n = 16) and three-fifths being model-specific (n = 21).
Most model-specific methods deal with multi-layer neural networks (n = 14), while
least model-specific methods focus on recurrent neural networks (n = 1) and none
on SVMs. Among model-agnostic methods, an equal number of articles deal with
explanation by simplification and feature relevance explanation (n = 5).
In Fig. 8, we provide an overview of the publication trend of XAI research in
Finance grouped by explainability type. Research trends change over time regarding
transparent models (blue) or post-hoc explainability (orange). Some papers employ
both types of XAI, while others employ neither (n = 6), focusing on goals instead
(see Table 3). While up to 2018, except for 2012, there has been more, or at least
as much, research applying transparent models compared to post-hoc explainability,
13
Table 4 Overview of XAI in Finance papers applying specific XAI methods (n = 54)
XAI
Transparent models Post-hoc explainability
Model-agnostic Model-specific
Article Logistic/ Deci- K-near- Rule- General Bayesian models Explana- Feature Visual Ensem- Support Multi- Convo- Recurrent
linear sion est base additive tion by rel- explana- bles and vector Layer lutional neural
regres- trees neigh- learners models simplifi- evance tion multiple machines neural neural networks
sion bors cation explana- classifier net- networks
tion systems works
Achituve x
et al.
(2019)
Adams and x x
Hagras
(2020)
Alam et al. x
(2020)
Ariza-Gar- x
zón et al.
(2020)
Attanasio x
et al.
(2020)
Bastos x x
(2010)
Bekiros x
(2010)
Butaru x x
et al.
(2016)
13

Table 4 (continued)
XAI
13
tion systems works
Carta et al. x
(2021)
Chen et al. x
(2012)
Cheong x x
et al.
(2021)
Chou x x
(2019)
Cong et al. x
(2020)
Dastile and x x
Celik
(2021)
Dat- x
tachaud-
huri et al.
(2020a)
P. Weber et al.
XAI
tion systems works
Dat- x
tachaud-
huri et al.
(2020b)
Duan and x
Zeng
(2015)
Ferdaus x
et al.
(2021)
Guo et al. x
(2021)
Hayashi x
et al.
(2015)
Horel et al. x
(2018)
Ito et al. x
(2021)
13

XAI
13
tion systems works
Jarovsky x
et al.
(2018)
Kamal- x
loo and
Abadeh
(2010)
Khandani x x
et al.
(2010)
Kim et al. x x
(2011)
Kong et al. x
(2020)
Kraus et al. x
(2020)
Kute et al. x
(2021)
Lee et al. x
(2021)
P. Weber et al.
XAI
tion systems works
Li et al. x
(2018)
Liu et al. x
(2021)
Lusinga x
et al.
(2021)
Maree x x
et al.
(2020)
Mariotti x
et al.
(2021)
Mayer x
et al.
(2020)
Nian et al. x
(2021)
Park et al. x
(2021)
13

XAI
13
tion systems works
Rajab and x
Sharma
(2019)
Rosati x x x
et al.
(2020)
Saeed and x
Hagras
(2018)
Sanz et al. x x
(2015)
Schnaubelt x
et al.
(2020)
Shi et al. x
(2019)
Sigrist and x x
Hirn-
schall
(2019)
P. Weber et al.
XAI
tion systems works
Wang et al. x
(2020)
Wu and Yan x
(2019)
Xu et al. x
(2017)
Yang et al. x
(2018)
Zhang et al. x x
(2020a)
Zhang et al. x
(2020b)
Zhang et al. x
(2019)
Zheng et al. x
(2020)
Zhu et al. x x
(2020)
Count 7 12 2 11 0 0 5 6 5 2 0 14 4 1
13
P. Weber et al.
this trend recently shifted. If we consider the research-intense years of 2019–2021,

the volume of research and its distribution changed. Research employing post-hoc
explainability surpassed the former more popular transparent models by far with,
e.g., almost four times as many papers dealing with post-hoc explainability (n = 11)
than with transparent models (n = 3) in 2021. This development is in line with the
general development of AI-based systems, where complex AI methods such as deep
neural networks are more frequently used for decision-making.
Table 5 gives an overview of XAI methods concerning their application areas in
Finance. This overview allows us to indicate blind spots, deriving fruitful avenues
for future research, especially from a Finance point of view. From Table 5, we can
infer underrepresented research areas in Finance, such as anti-money laundering.
Up-and-coming scientists may evaluate the application of other XAI methods, e.g.,
rule-based learners or SVMs, to these areas to advance research and help practition-
ers employ AI models complemented with explainability. Of course, it is manda-
tory to investigate the absence of XAI methods applications in Finance areas derived
from Table 5. Some combinations might be less than others or not fruitful at all.
For instance, new researchers undertaking projects in this space should take a closer
look at the Finance area of electronic financial transaction classification and try to
apply XAI methods such as logistic/linear regression or visual explanation. Thus,
they will advance research by supplementing the current research landscape with
new insights or providing evidence for the impossibility of such an XAI method and
Finance area combination. Furthermore, we may spot areas of Finance, which are
already well-researched, such as risk management and portfolio optimization. These
areas may benefit from applying new yet unused XAI methods, which we do not list
in our overview in Table 5, or from comparing research between the methods men-
tioned above to acquire a broader perspective on the subject at hand, e.g., comparing
transparent models and post-hoc explainability.
Furthermore, we discern that research tackled some, but not all, of the most press-
ing issues in Finance. Risk management is central to the Finance industry in many
respects and essential for the successful continuation of a wide variety of agents.
Hence, it is not surprising that prior research put much effort into researching the
application of XAI in this Finance area due to its centrality to the domain (Adams
and Hagras 2020). The same applies to the stock market and portfolio optimization,
building blocks upon which the success of many agents in the domain of Finance
grounds (Zhang et al. 2020a). Besides, anti-money laundering is one of the most
pressing issues threatening financial systems (Kute et al. 2021). However, research
so far has only rarely tackled this issue, posing the question of why that is the case.
Classifying electronic financial transactions has recently become a differentiator in
customers’ eyes. Therefore, agents in the financial domain renewed their interest in
this area (Maree et al. 2020).
Hence, prior research focused on more critical and also predestinated Finance
areas and evaluated the application of at least one XAI method per area. However,
there is still an imbalance urging research attention in the future on the one hand
concerning the application of more diverse XAI methods to several areas. On the
other hand, future research should assess less urgent but still promising areas in
Finance for possible application of XAI methods.
13
Table 5 Overview of XAI methods and areas of Finance research considered
XAI
Areas of Logistic/ Decision K-near- Rule- General Bayesian Explana- Feature Visual Ensem- Support Multi- Convo- Recurrent
Finance linear trees est base additive models tion by relevance explana- bles and vector layer lutional neural
regres- neigh- learners models simplifi- explana- tion multiple machines neural neural networks
sion bors cation tion classifier networks networks
systems
Risk x x x x x x x x x x
Man-
age-
ment
Stock x x x x x x x x x
market
Portfolio x x x x x x x
Optimi-
zation
Anti- x
Money
Laun-
dering
Elec- x x
tronic
Finan-
cial
Trans-
action
Classi-
fication
13
P. Weber et al.
5 Conclusion and future research avenues
To exploit AI applications’ full potential in Finance, XAI methods’ employ-

ment seems promising. Using XAI instead of AI is decisive to ensure the neces-
sary level of transparency and traceability required by regulatory and legal entities
and achieve the trust needed for such systems to be deployed. However, research
on XAI in Finance is highly dispersed over application areas and research methods
(see Table 4). Frequently, researchers only investigated applying a particular XAI
method to a specific use case. In this way, however, research takes place very iso-
lated. This study provides an overview of previous research and aggregates prior
research results to help exploit the full potential of XAI. Thus, we identify future
research directions. To the best of our knowledge, there is no research reviewing the
application of XAI in Finance on a broader level, albeit the necessity to implement
XAI methods to ensure legally binding traceability and transparency of decisions
made by the system in the financial industry. We are the first to provide an SLR
and thus advance the fields of Finance, IS, and CS. This way, we contribute to con-
ceptualizing the topic under investigation and answer respective calls for research.
This paper aims to guide future research and to be a thorough approach to the sub-
ject. To achieve this goal, we reviewed relevant Finance, IS, and CS journals next to
important databases, analyzing 60 articles in detail to acquire an overview of recent
research (year 2010 to year 2021) dealing with this topic. We discuss our results
by summarizing the implications for both researchers and practitioners. Finally, we
present the limitations of our study and avenues for future research regarding XAI in
Finance.
5.1 Theoretical implications
Our research contributes to academia’s emerging interest in XAI in Finance research

(see Fig. 5). In this vein, we provide an easy-to-follow, low-threshold, comprehen-
sive overview for interested scholars willing to get acquainted with XAI in Finance.
We provide basics of XAI method application in Finance, next to areas of Finance
where XAI employment is likely fruitful and pressing. Finally, we present research
trends and cluster research and discuss the combinations of XAI methods and areas
of Finance existing research focused. Due to the recent increase in publications, a
reasonable amount of overlap between specific research streams emerged. In a per-
fect world, these scientists consolidate their work and progress together, rather than
in parallel, into the future.
Our research offers broad guidance for scientists to understand the growing
emphasis on XAI in Finance research, which we also found in other domains (Wells
and Bednarz 2021; Islam et al. 2022). When looking at the disciplines that focused
on XAI in Finance, we found a minority of research rooted in the Finance discipline.
Thus, we especially encourage Finance researchers to evaluate how XAI may benefit
their field of application. As most articles were published in outlets without a rating
by VHB, we conclude that research predominantly took an application point of view,
13
thus, possibly, neglecting the theory-building and development part of research. We

highly encourage XAI and Finance researchers to consider engaging in theory build-
ing and development regarding XAI in Finance in high-ranked outlets.
When taking a closer look at the goals these papers try to achieve with the appli-
cation of XAI, we notice an imbalance already highlighted by prior research (e.g.,
Arrieta et al. 2019). The reviewed articles mainly focus on the goals of informative-
ness and confidence but rather neglect the goals of, e.g., privacy awareness, accessi-
bility, and causality. Hence, research pursuing these goals might be a fruitful avenue
for future research, especially as laws, e.g., the GDPR, emphasize privacy and the
right to informational self-determination. Future research has to unravel this mis-
match and identify potential reasons for it.
Besides, theorists may benefit from our study employing it as an overview of cur-
rent research on XAI and especially in Finance. While there is research dealing with
AI in IS and CS (e.g., Abdel-Karim et al. 2021; Martin 2019; Rai et al. 2019) or
Finance (e.g., Cao 2020, 2022; Goodell et al. 2021; Zheng et al. 2019) or XAI in
general (e.g., Arrieta et al. 2019; Ciatto et al. 2020; Doran et al. 2017; Rosenfeld and
Richardson 2019; Sanneman and Shah 2020; Verhagen et al. 2021), so far, there is
no paper reviewing the current state of research on XAI in Finance in leading inter-
national journals and conferences. Scientists looking for the distribution of a specific
XAI method in Finance find answers in our provided results. For instance, they may
spot decision trees and multi-layer neural networks as well-researched XAI method
applications in Finance or find an indication for the underrepresentation of, e.g.,
Bayesian models. Additionally, we provide interested researchers with a set of stud-
ies employing both kinds of XAI, transparent models next to post-hoc explainability,
in the area of Finance, thus highlighting these comparing works.
With our overview of XAI methods and areas of Finance, we identified blind
spots for future research. We provide a summary of XAI methods, which are less
researched than others. Future researchers could focus on these underrepresented
areas, e.g., k-nearest neighbors or SVMs, to broaden our understanding of applicable
XAI methods in Finance, albeit having to investigate the reason for this research
paucity first. Similarly, we point out fewer explored still pressing areas of Finance
that could benefit from additional research on XAI method applicability to provide
a better understanding of (potential) XAI method employment in Finance, e.g.,
anti-money laundering. Besides, new researchers undertaking projects should take
a closer look at the Finance area of electronic financial transaction classification
and try to apply XAI methods such as logistic/linear regression or visual explana-
tion. Thus, they will advance research by supplementing the current research land-
scape with new insights or providing evidence for the impossibility of such an XAI
method and Finance area combination. XAI applications in the Finance area of risk
management, especially default and bankruptcy prediction, deserve further research,
as financial institutions perform them continuously due to regulatory requirements
(Adams and Hagras 2020). In addition, future research should evaluate less press-
ing Finance areas for the potential application of XAI in future. Still, applying XAI
models to less pressing and therefore less present Finance areas could be rewarding
for the domain concerning a more comprehensive understanding.
13
P. Weber et al.
When analyzing the contributions of the final set of papers, most models can vis-
ibly outperform current industry practices and offer transparency and traceability
of decisions, hence fulfilling the requirements for automating processes in Finance.
Nevertheless, very few papers deal with whether the developed or applied methods
and models actually meet regulatory requirements and can thus be implemented in
practice (except for, e.g., Park et al. 2021). Especially in a highly-regulated appli-
cation domain like Finance with legal requirements for using AI-based systems in
practice, such an assessment should be part of the individual evaluations. Accord-
ingly, this represents an important future research endeavor to examine and consider
compliance with existing laws and regulations during the development and testing of
methodologies. Summing up, we provide a research agenda for future XAI research
in Finance incorporating different approaches to the issue.
Finally, our research results also emphasize the need for XAI compared to mere
AI deployment in Finance. However, one of the problems targeted by XAI is not
new to research. One may also interpret XAI as a means of information asymmetry
reduction. Information asymmetry refers to a state where a party has less or other
information than their counterpart in a (planned) mutual relationship or contract
(Akerlof 1970). AI implementation might create such a situation between the AI
user and the AI tool when the user knows less or nothing about the inner mecha-
nisms of an applied AI tool. XAI may educate the user with such knowledge, thus
helping reduce the aforementioned information asymmetry. In Finance, this helps
increase trust and understandability of AI systems, ultimately leading to higher
adoption rates. Currently, multiple XAI methods apply to areas of Finance such as
risk management and the stock market. Hence, we conclude higher relevance of
information asymmetries and needs for information asymmetry reduction in these
areas.
5.2 Managerial implications
Interested readers from business practice may also thrive by consulting our study.
Our review provides an easy-to-follow, low-threshold, comprehensive overview for
interested practitioners willing to get acquainted with XAI in Finance. Legislators,
regulators, and Finance managers seeking to educate themselves benefit from our
research, as we provide the basics of XAI methods employed in Finance. Addition-
ally, we identify application areas in Finance where XAI employment is likely to be
fruitful. We furthermore present research trends and cluster existing research, next
to discussing the combinations of XAI methods and areas of Finance researched so
far. As academia preferred the methods of real market datasets and experiments, it
adds to this study’s practical applicability, showing practitioners that XAI is already
well-connected to, e.g., real market datasets and thus more readily available for
implementation.
Research on XAI in Finance is dispersed and thus makes it difficult for practition-
ers to get an overview of possibly suitable XAI methods for a specific application
problem or to fathom possible areas of application for XAI methods. Our study maps
XAI methods and areas of Finance, thus providing easy access to the deployment of
13
XAI methods in practice. Hence, Finance managers planning to adopt XAI might
consider our work an initial overview. Looking for existing XAI applications in their
specific Finance areas, they may consult our study to learn about ready-to-employ
solutions to add transparency and explainability to their yet black-box nature AI-
based systems or not-yet automated processes. Alternatively, existing knowledge in
the company about specific XAI models can be used, and possible application sce-
narios can be identified.
Accordingly, practitioners can use our study as a concrete guideline on how XAI
can be implemented in Finance and thus gain a quick overview. This study aggre-
gates yet scattered research on XAI in Finance to provide more copious and easier
access to XAI in Finance, and thus brings us one step closer to unlocking the full
potential of such systems in this industrial sector. In addition to providing general
ideas for implementing XAI systems, the paper helps as a tangible overview of
which financial sectors already have solutions that managers can consider in prac-
tice. In this vein, this study should anchor XAI usage in Finance.
Currently, practitioners lack concrete guidance on the legally compliant appli-
cation of AI and XAI methods in Finance (Weber et al. 2020). Due to the highly-
regulated application domain of Finance and its specific requirements for transpar-
ency and traceability of decisions and processes, practitioners face a very complex
decision-making situation when they want to implement such methods in practice.
Accordingly, this paper supports them in identifying already acceptable methods
from a regulatory point of view, especially by motivating future research in this field
of application. For instance, they could inspect the literature we presented and filter
for works employing the method of case studies in order to observe what kinds of
XAI were already applied in real Finance business cases.
Moreover, and most importantly, this study supports policymakers in establishing
more specific regulations and prerequisites for using AI-based systems in Finance.
As we showed in Fig. 8, research regarding XAI in Finance recently shifted from
mainly incorporating explainability by design (transparent models) to mainly apply-
ing explanations through external XAI techniques (post-hoc explainability). Legisla-
tors and regulators may want to respond to this trend by designing laws and regula-
tory requirements concerning this type of XAI techniques. For instance, post-hoc
explainability methods are independent of the AI models they explain, which might
require a distinct legislative approach for the former than for the latter.
Finally, practitioners may infer current or future trends in XAI in Finance
research to prepare their businesses for future challenges. Practitioners may employ
our overview as a guideline for their yet-to-come operations. For instance, they
could enhance their employees’ technical skills by educating them about XAI meth-
ods from our aggregated research endeavors, e.g., decision trees, a rather widely
applied XAI method in Finance, or ensembles and multiple classifier systems, a yet
relatively rarely used XAI method in Finance.
13
P. Weber et al.
5.3 Future research
The results reveal several further research avenues worth evaluating: We highly
encourage future scientists to further enrich the research on XAI application in
Finance. More precisely, forthcoming researchers should focus on underrepresented
areas
• of XAI goals, i.e., causality, accessibility, and privacy awareness,

• of XAI method employment, i.e., k-nearest neighbors, general additive mod-
els, Bayesian models, ensembles and multiple classifier systems, SVMs, recur-
rent neural networks, and the comparison of transparent models and post-hoc
explainability, and
• of Finance, i.e., anti-money laundering and electronic financial transaction clas-
sification as well as less pressing Finance areas,
and especially their various combinations. It is essential and beneficial to have a

broad understanding of XAI in Finance regarding specific goals, methods, and areas.
Nevertheless, a broad understanding of the subject is important and should be a step
for future research. Goals that have not yet been researched more intensively in the
context of XAI in Finance nevertheless represent important fields of action for this
domain. Particularly in Finance—and the correspondingly sensitive data—e.g., pri-
vacy awareness is of decisive importance and may even be required by regulation.
There is a plethora of XAI methods applicable to the domain of Finance. However,
most research focuses on only a few of these methods. Still, future research should
exploit the versatility of established XAI methods. Only in this way can the potential
of different methodologies be evaluated and thus also exploited. In addition, this
study only examined Finance areas pressing and predestined for applying XAI in
Finance or even requiring explainability. Accordingly, it makes sense to extend the
focus of previous research to the yet understudies pressing areas as well as further
Finance areas not yet that present in the scholarly discussion.
To ensure the practical relevance of research, researchers should focus on regu-
latory compliance of existing and new XAI methods in Finance. Only in this way
can one exploit the potential of XAI in Finance. The practical use of such systems
is highly regulated. Therefore, compliance is crucial for such systems’ practical rel-
evance. So far, there is hardly any discussion of the results in the context of regula-
tory compliance—a gap researchers should close with future studies.
Despite our best efforts, the findings and implications of our SLR are not without
limitations, thus motivating future research. Although we tried to base our literature
search on a broad variety of databases, there is still the possibility of researching
more outlets, varying keywords, and including a broader publication date range to
receive an even richer set of results (e.g., Berg 2007; Taylan et al. 2007). Even then,
an exhaustive SLR remains impossible. We focused on recent research from the last
decade to retrieve articles relevant to contemporary researchers and practitioners.
Nevertheless, broadening and updating the SLR over time is an important avenue for
future research.
13
The focus on XAI application in specific Finance areas may impose another
limitation. However, this paper emphasized once again that even a highly-regulated
application domain, such as the financial industry, does not represent a uniform field
of application but rather many different areas with different requirements belonging
to this industry. Accordingly, our research should motivate future scientists to per-
form similar analyses of the applicability of XAI methods in other areas of Finance
and industries, including Healthcare and Automotive, and thus pave the way for a
further spread of XAI in the most diverse industries with different requirements.
In conclusion, our study contributes to literature and practice by providing an
easy-to-follow, low-threshold, comprehensive overview of previous works and a
research agenda for future XAI research in Finance.
Supplementary Information The online version contains supplementary material available at https://doi.
org/10.1007/s11301-023-00320-0.
Acknowledgements We gratefully acknowledge research support from the efl–the Data Science Institute,
Germany.
Author contribution All authors contributed to the study conception and design, material preparation,
data collection and analysis, and the first draft of the manuscript. All authors commented on previous ver-
sions of the manuscript. All authors read and approved the final manuscript.
Funding Funding from the efl–the Data Science Institute, Germany enabled the research project. Open
Access funding enabled and organized by Projekt DEAL.
Data availability The data sets used in our publication are not publicly available. Still, interested readers
may get access to the data sets used for coding by contacting the authors.
Declarations
Conflict of interest The authors have no relevant financial or non-financial interests to disclose.
Open Access This article is licensed under a Creative Commons Attribution 4.0 International License,
which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as
you give appropriate credit to the original author(s) and the source, provide a link to the Creative Com-
mons licence, and indicate if changes were made. The images or other third party material in this article
are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the
material. If material is not included in the article’s Creative Commons licence and your intended use is
not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission
directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licen
ses/by/4.0/.
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Management Review Quarterly

Applications of Explainable Artificial Intelligence

Patrick Weber1 · K. Valerie Carl1 · Oliver Hinz1

Received: 16 November 2022 / Accepted: 13 January 2023

Keywords Explainable artificial intelligence · Finance · Systematic literature

JEL Classification G00 · L50

and anti-money laundering as a combination of a specific XAI method with a spe-

possibilities for usage of (X)AI-based systems in Finance. Then, we give an over-

2.2 Explainable Artificial Intelligence

Table 1 Goals of XAI based on Arrieta et al. (2019)

Transparent models must satisfy specific properties to be explainable to decision-

Fig. 1 Example decision tree

Fig. 2 Example ICE plot

methods can be classified into three categories: explanation by simplification, fea-

2.3 Technological advances in Finance

Fig. 3 Example partial dependence plots (Sigrist and Hirnschall 2019, p. 28)

checking government-issued IDs. The application of AI models may improve this

The conducted SLR aims to provide a comprehensive overview of previously dis-

Table 2 Search terms used

Explainability “Transparen*” or “explain*” or “explanat*” or “interpret*” or “black box” or

a transparent and reproducible process, providing trustable, reliable, and rigorous

Fig. 4 Visualization of the SLR process

on peer-reviewed outlets, we defined the following rigid exclusion criteria4 to filter

• The paper deals with Finance but not with XAI.

Fig. 5 Publication trend of XAI 17

Fig. 6 Methodological overview Algorithm Case Study, 2

4.2 Overview concerning XAI goals and methods

Lusinga et al. (2021); Ge et al. (2021)

Fig. 8 Publication trend of XAI 12

Transparent Models Post-Hoc Explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

Transparent models Post-hoc explainability

this trend recently shifted. If we consider the research-intense years of 2019–2021,

Transparent models Post-hoc explainability

5 Conclusion and future research avenues

To exploit AI applications’ full potential in Finance, XAI methods’ employ-

Our research contributes to academia’s emerging interest in XAI in Finance research

thus, possibly, neglecting the theory-building and development part of research. We

• of XAI goals, i.e., causality, accessibility, and privacy awareness,

and especially their various combinations. It is essential and beneficial to have a

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2.2 Explainable Artificial Intelligence

Table 1 Goals of XAI based on Arrieta et al. (2019)

Fig. 1 Example decision tree

Fig. 2 Example ICE plot

2.3 Technological advances in Finance

Fig. 3 Example partial dependence plots (Sigrist and Hirnschall 2019, p. 28)

Table 2 Search terms used

Explainability “Transparen” or “explain” or “explanat” or “interpret” or “black box” or

Fig. 4 Visualization of the SLR process

Fig. 5 Publication trend of XAI 17

Fig. 6 Methodological overview Algorithm Case Study, 2

4.2 Overview concerning XAI goals and methods

Fig. 8 Publication trend of XAI 12

5 Conclusion and future research avenues