A Model of the Transition from Human to Algorithmic DecisionMaking in the Financial Sector

This article examines the transition from human to algorithmic decision-making in the financial sector. It demonstrates the potential of algorithmic governance, which is unlocked through the development of financial institutions and algorithms that transform the decision-making process. The article presents a periodization of the development of algorithmic governance in finance and discusses the benefits and challenges associated with this transition. It emphasizes the importance of algorithmic decision-making in the formation of new financial practices and addresses issues of legitimization, institutionalization, and social acceptance. A simplified transition model is presented, illustrating the replacement of human decisions with algorithmic ones in the financial industry. To illustrate this process, dynamic equations are presented for key variables such as F, S, A, and R. It is shown that changes in decision making have led to the development of proactive financial management, which makes extensive use of modern algorithmic systems, including data analysis, risk assessment, and the interaction of financial and non-financial systems, the legitimization of algorithms, and the emergence of algorithmic institutionalism.