Why small businesses are craving more AI regulation

As the value of artificial intelligence continues to be debated among larger industries and enterprise organizations, small businesses are struggling to understand how the technology may impact them.

Seventy-three percent of small business owners in the U.S. are concerned AI development and adoption is outpacing regulation, according to a recent survey from Xero, a global small business platform. Thirty-eight percent listed sensitive information disclosure as their biggest concern, 36% data privacy violations and 35% worker displacement.

"With dozens of new AI tools seemingly being released every week, and precious little spare time and resources to dedicate to understanding them, small businesses [should] be forgiven for putting AI into the 'too-hard' basket for now," says James Bergin, senior executive at Xero. "Helping small businesses understand what capabilities these new technologies could bring, and how they might help businesses thrive, is vital to helping them succeed."

Read more: For benefit advisers, smart tech and AI are a stepping stone to better client service

In spite of small business owners' doubts and fears around AI, they have an awareness that they will ultimately need to leverage its capabilities. In fact, 37% of small businesses have started experimenting with AI, 25% have started investing and 19% have started working with third-party AI vendors or experts. According to Xero's survey, only 30% of small businesses haven't taken any proactive steps at all. 

"We see AI playing a vital role in two ways for small businesses: streamlining time-consuming manual processes; and delivering the right insights at the right time, so small business owners and their advisers can spend more time running their business," Bergin says. "AI has the power to augment human intelligence, not replace it." 

Yet there are drawbacks business owners are keeping in mind. Xero's survey found that due to AI's implementation, 16% of small businesses have seen increased biases or inaccuracies in content, another 16% saw a decrease in employee morale, 15% a decrease in efficiency and 15% have even started to see a reduced headcount.

AI may negatively impact a company's client base, too. Nearly half of business owners have said they trust AI with identifiable customer information and 41% with their sensitive commercial information. That signals that many small businesses may be putting their data at risk.

Read more: How AI and machine learning can help with DEI hiring

"Any small business that's using AI tools should have a policy in place to guide their usage," Bergin says. "We would encourage small businesses to talk to professional advisers about the type of data they want to use with an AI tool and how they want to use it,, and then set up some guidelines to help them manage their risk in this space."

If companies want to manage the AI implementation themselves, they can create policies and guidelines for employees, providing training to employees on identifying biases or inaccuracies and seeking written consent from clients and customers before using any AI tools. If that still seems too daunting, companies can delegate much of that to third party platforms and vendors such as Xero. 

"To set yourself up for success, make sure you are looking for ways it can really add value to your business," Bergin says. "And again, most importantly — always keep security top of mind."