Explainable AI Market

Explainable AI Market Size

The global explainable AI market size reached US$ 5.32 Billion in 2022. Looking forward, IMARC Group expects the market to reach US$ 14.83 Billion by 2028, exhibiting a growth rate (CAGR) of 18.34% during 2023-2028. The growing adoption of artificial intelligence (AI) in various industries, increasing demand for transparency and accountability, and surging need for better decision-making are some of the major factors propelling the market.

Explainable AI refers to the capability of artificial intelligence (AI) systems to provide understandable explanations and justifications for their decisions and actions. It enables humans to comprehend and trust the decisions made by AI systems through interpretable explanations. Explainable AI techniques include visualizations, natural language explanations, rule-based systems, and feature importance analysis. By providing transparency and insights into AI's decision-making process, explainable AI promotes accountability, fairness, and ethical use of AI in various domains such as healthcare, finance, and autonomous vehicles.

The increasing adoption of automation across various industrial verticals to save time and resources and improve the accuracy of decision-making processes represents one of the key factors driving the market growth. Besides this, the rising regulatory scrutiny and the need for compliance regarding transparency and explainability in AI processes and outcomes to ensure reliability, accountability, and ethical use are contributing to the market growth. Moreover, the escalating awareness about the benefits of ethical and responsible AI is propelling the use of explainable AI to address concerns related to biased decision-making, privacy violations, and potential risks. In addition to this, the widespread product usage in risk management to identify and address potential risks, errors, or biases in AI models, mitigating any negative impacts on business operations or customer experiences, is propelling the market forward. Furthermore, ongoing product innovations and advancements in machine learning (ML) and natural language processing (NLP) technologies are strengthening the market growth.

Explainable AI Market Trends/Drivers

Increasing demand for transparency in AI decision-making

As AI systems become more prevalent in various industries, there is a growing need for these systems to be transparent and easily understood. This is particularly essential in sectors such as healthcare and finance, where decisions made by AI systems can have significant consequences. The demand for transparency is driving the development of explainable AI systems that can provide human-interpretable explanations for their decision-making processes. Moreover, the expanding product utilization in critical decision-making with liability and legal considerations to determine the accountability of AI outcomes and evidence of how decisions were reached is presenting remunerative growth opportunities for the market. Apart from this, explainable AI is essential in the context of autonomous systems, such as self-driving cars or drones, as it allows humans to comprehend the decision-making process of these systems, ensuring safety, trust, and accountability in their operation.

Rise in regulatory and compliance requirements

One of the primary drivers behind the global explainable AI market is the rising regulatory and compliance requirements in various industries, such as finance, healthcare, and automotive, to ensure fairness, accountability, and ethical use. Governments and regulatory bodies have recognized the importance of transparency and accountability in AI systems to ensure ethical use and prevent biases or discriminatory outcomes. As a result, the introduction of the General Data Protection Regulation (GDPR) in Europe and various guidelines from organizations, such as the Financial Stability Board (FSB), emphasize the need for explainability in AI algorithms, thus creating a favorable outlook for the market. Moreover, an increasing number of organizations are adopting explainable AI solutions in compliance with these regulations and guidelines to provide transparent and interpretable AI systems, which, in turn, is positively impacting the market growth.

Trust and User Acceptance

Trust and user acceptance play a crucial role in the widespread adoption of AI systems. Lack of transparency and black-box decision-making often leads to skepticism and reluctance among users. Explainable AI addresses this challenge by providing explanations for AI decisions, bridging the gap between AI models and human understanding. Consequently, there is rising demand for explainable AI across healthcare, finance, and autonomous vehicles domains where the impact of AI decisions can be consequential in validating and verifying AI outcomes, enhancing their confidence and acceptance of AI technology. In addition to this, organizations increasingly recognize the importance of ethical and responsible AI, impelling the need for explainable AI to address concerns related to biased decision-making, privacy violations, and potential risks, fostering trust and acceptance among users and stakeholders.

Explainable AI Industry Segmentation

IMARC Group provides an analysis of the key trends in each segment of the global explainable AI market, along with forecasts at the global, regional, and country levels from 2023-2028. Our report has categorized the market based on component, deployment, application, and end use.

Breakup by Component:

• Solution
• Services
   

Solution is dominating the explainable AI

The report has provided a detailed breakup and analysis of the explainable AI market based on the component. This includes solution and services. According to the report, solution represented the largest segment.

With the implementation of numerous stringent regulations, such as the GDPR and industry-specific guidelines emphasizing the need for transparency and interpretability in AI systems, there is rising adoption of explainable AI solutions to ensure compliance. In addition to this, the expanding adoption of explainable AI services in risk management to identify and mitigate biases in AI models and enable error analysis and debugging, ensuring the reliability and robustness of AI systems, is contributing to the market growth.

Breakup by Deployment:

• Cloud
• On-premises
   

On-premises hold a larger share in explainable AI

A detailed breakup and analysis of the explainable AI market based on the deployment has also been provided in the report. This includes cloud and on-premises. According to the report, on-premises accounted for the largest market share.

The rising popularity of cloud-based explainable AI solutions, as they offer the advantage of flexibility and scalability, allowing organizations to scale their AI capabilities based on their needs without the limitations of physical infrastructure, is strengthening the market growth. Concurrent with this, the cost-effectiveness associated with cloud-based explainable AI is acting as another significant growth-inducing factor. Apart from this, the increasing demand for on-premises explainable AI solutions in organizations, particularly across those in highly regulated industries or with sensitive data, that prefer to maintain complete control and compliance is propelling the market forward. Moreover, on-premises solutions offer customization options, allowing organizations to tailor the explainable AI models and algorithms to their specific needs, further fueling their demand.

Breakup by Application:

• Fraud and Anomaly Detection
• Drug Discovery and Diagnostics
• Predictive Maintenance
• Supply Chain Management
• Identity and Access Management
• Others
   

Fraud and anomaly detection dominating the explainable AI

The report has provided a detailed breakup and analysis of the explainable AI market based on the application. This includes fraud and anomaly detection, drug discovery and diagnostics, predictive maintenance, supply chain management, identity and access management, and others. According to the report, fraud and anomaly detection represented the largest segment.

The expanding product applications in fraud and anomaly detection to identify fraudulent activities and anomalies in complex datasets by providing transparent explanations for detection outcomes are contributing to the market growth. Besides this, the large-scale product adoption across the thriving pharmaceutical sector to provide interpretable insights into drug discovery processes and understand the relationships between molecular structures, drug targets, and therapeutic effects is aiding in market expansion. Moreover, the increasing use of explainable AI in predictive maintenance to enable proactive maintenance strategies and help organizations identify early warning signs and root causes of maintenance issues is positively impacting the market growth.

Breakup by End Use:

• Healthcare
• BFSI
• Aerospace and Defense
• Retail and E-commerce
• Public Sector and Utilities
• IT and Telecommunication
• Automotive
• Others
   

IT and telecommunication hold a larger share in explainable AI

A detailed breakup and analysis of the explainable AI market based on the end use has also been provided in the report. This includes healthcare, BFSI, aerospace and defense, retail and e-commerce, public sector and utilities, IT and telecommunication, automotive, and others. According to the report, IT and telecommunication accounted for the largest market share.

The bolstering growth of the BFSI sector, where explainable AI is extensively employed in fraud detection, risk assessment, credit scoring, enhancing trust, regulatory compliance, and mitigating risks associated with biased or erroneous AI predictions, is contributing to the market growth. In line with this, the increasing demand from the aerospace and defense industries to ensure the interpretability of autonomous systems and improve mission planning, target identification, and cybersecurity is creating a favorable outlook for the market. Furthermore, explainable AI finds a variety of applications across the retail and e-commerce sectors, such as personalized marketing, demand forecasting, inventory management, and customer experience enhancement, which present lucrative growth opportunities for the market.

Breakup by Region:

• North America
  • United States
  • Canada
• Europe
  • Germany
  • France
  • United Kingdom
  • Italy
  • Spain
  • Russia
  • Others
• Asia Pacific
  • China
  • Japan
  • India
  • South Korea
  • Australia
  • Indonesia
  • Others
• Latin America
  • Brazil
  • Mexico
  • Others
• Middle East and Africa
   

North America exhibits a clear dominance in the market, accounting for the largest market share

The report has also provided a comprehensive analysis of all the major regional markets, which include North America (the United States and Canada); Europe (Germany, France, the United Kingdom, Italy, Spain, Russia, and others); Asia Pacific (China, Japan, India, South Korea, Australia, Indonesia, and others); Latin America (Brazil, Mexico, and others); and the Middle East and Africa.

The stringent regulatory landscape in North America, particularly the United States, regarding data protection and privacy regulations is propelling the adoption of explainable AI to ensure compliance and transparency in AI systems. In addition to this, the rising emphasis on ethical and fair AI practices in the region is acting as another significant growth-inducing factor. Apart from this, high public perception regarding AI transparency and accountability in Europe necessitates the use of explainable AI techniques. Furthermore, the Asia Pacific region is witnessing rapid technological advancements and digital transformation across various industries, impelling the adoption of AI systems, which, in turn, is creating a rising demand for explainable AI solutions to ensure transparency and accountability in AI decision-making.

Competitive Landscape

The global Explainable AI market is characterized by intense competition with the presence of numerous established players and emerging startups, technological advancements, collaborations, and a focus on delivering comprehensive and innovative solutions to meet the growing demand for transparency and interpretability in AI systems. Key players in the market are actively engaging in research and development (R&D) activities to enhance their explainable AI offerings and gain a competitive edge. They are also developing advanced explainable AI algorithms, tools, and platforms to address the increasing demand for transparency and interpretability in AI systems. Moreover, companies are increasingly adopting various growth strategies, such as partnerships, collaborations, and strategic acquisitions, to expand their product portfolios, stay at the forefront of explainable AI advancements and enhance their market presence.

The report has provided a comprehensive analysis of the competitive landscape in the global explainable AI market. Detailed profiles of all major companies have also been provided. Some of the key players in the global explainable AI market include:

• DarwinAI
• DataRobot Inc.
• Google LLC (Alphabet Inc.)
• International Business Machines Corporation
• Kyndi Inc.
• SAS Institute Inc.
• Seldon Technologies Limited

Recent Developments

• In May 2023, DataRobots Inc. announced a partnership with Microsoft to accelerate AI adoption in the enterprise that will allow their customers to build, deploy, and manage end-to-end enterprise-ready AI solutions on Microsoft Azure more easily.
• In March 2023, Alphabet Inc's Google opened access to its AI bot ‘Bard’ in a bid to compete with Microsoft Corp’s ‘ChatGPT’.
• In December 2022, DarwinAI, a company that is transforming manufacturing with AI, announced a $6M USD investment led by BDC Capital's ‘Deep Tech Venture Fund’ with participation from new and existing investors.

Explainable AI Market Report Scope:

Report Coverage:

Key Questions Answered in This Report:

• How has the global explainable AI market performed so far, and how will it perform in the coming years?
• What are the drivers, restraints, and opportunities in the global explainable AI market?
• What is the impact of each driver, restraint, and opportunity on the global explainable AI market?
• What are the key regional markets?
• Which countries represent the most attractive explainable AI market?
• What is the breakup of the market based on the component?
• Which is the most attractive component in the explainable AI market?
• What is the breakup of the market based on the deployment?
• Which is the most attractive deployment in the explainable AI market?
• What is the breakup of the market based on the application?
• Which is the most attractive application in the explainable AI market?
• What is the breakup of the market based on the end use?
• Which is the most attractive end use in the explainable AI market?
• What is the competitive structure of the global explainable AI market?
• Who are the key players/companies in the global explainable AI market?

Key Benefits for Stakeholders

• IMARC’s report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the explainable AI market from 2017-2028.
• The research study provides the latest information on the market drivers, challenges, and opportunities in the global explainable AI market.
• The study maps the leading, as well as the fastest-growing, regional markets. It further enables stakeholders to identify the key country-level markets within each region.
• Porter's five forces analysis assist stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the explainable AI industry and its attractiveness.
• Competitive landscape allows stakeholders to understand their competitive environment and provides an insight into the current positions of key players in the market.