Explainable AI Market Size, Share, and Trends

Explainable AI Market Size and Growth 2023 to 2032

The global explainable AI market size accounted for USD 6.83 billion in 2022 and it is expected to hit around USD 36.42 billion by 2032, growing at a CAGR of 18.22% during the forecast period from 2023 to 2032.

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Key Takeaways:

• North America dominated the market with the largest size of 41% in 2022.
• Asia Pacific is expected to expand at the fastest CAGR of 25% from 2023 to 2032.
• By component, the solution segment accounted for the largest segment of 83% in 2022.
• By component, the service segment is expected to hold a significant market share in the forecast period.
• By deployment, the on-premise segment generated more than 56% of the revenue share in 2022.
• The cloud segment is expected to hold accountable market share in the forecast period.
• By application, the fraud and anomaly detection segment registered the largest market share of 24% in 2022.
• By application, the drug discovery and diagnostics segment is expected to grow significantly.
• By end-use, the IT & Telecommunication segment contributed to the largest market size of 19% in 2022.
• By end-use, the retail and e-commerce segment is expected to dominate the market with the largest market share in the forecast period.

Explainable AI Market Overview:

Explainable artificial intelligence is the technology in artificial intelligence that is developed to provide human interpretation explanations for the decision-making process. Explainable AI is used in several industries such as healthcare, automobile, internet and telecommunication, and others. The modern era is almost dependent on emerging technologies and technological innovations. Artificial intelligence is one of the most promising technologies emerging in recent times for organizational growth. The explainable AI is also known as interpretability. Interpretability allows industries/end-users to understand the model of learning and the explanation behind the judgments in light of the real-world issues that are attempting to address. Explainable AI enhances the operations like trustworthiness, transparency, fairness, and accountability of Artificial Intelligent systems.

Growth Factors:

Explainable AI is used for the organization's development and market growth of it. The continuous technological development in regions like North America and Asia-Pacific has resulted in a major expansion in the growth of the market. The explainable Ai is used for the detection of cybercrime. The accessibility and accuracy of solutions and services offered by explainable AI have highlighted its importance in multiple sectors.

Explainable AI is used for the detection of the problem and increases confidence and elimination of biases in the organization.  Explainable AI detects the mistakes and flaws of the system and gives solutions with newer insights. The growth of the explainable AI market is driven by the rising requirements to improve inventory management for better recalling clients by proving the significant retention strategy by providing building trust, improving customer satisfaction, and providing transparency.

Explainable AI Market Scope

Explainable AI Market Dynamics

Drivers:

Rising collaborative activities between human and artificial intelligence

Collaboration between humans and AI is essential to meet regulatory and compliance requirements. Explainable AI enables organizations to provide justifications and evidence for the decisions made by AI systems, ensuring transparency and compliance with regulations. Human collaboration in the interpretation and explanation of AI decisions helps meet legal obligations and regulatory standards. Collaboration between humans and AI facilitates continuous learning and adaptation. Human experts can share their knowledge and expertise with AI systems, enabling them to learn from human feedback and adapt to evolving circumstances. This collaborative learning process improves the AI system's performance over time. Overall, the collaboration between humans and AI drives the growth of the explainable AI market by leveraging the strengths of both parties.

Restraints:

Performance limitations

In highly competitive industries, organizations may prioritize the performance of AI models over interpretability. If black-box models consistently outperform explainable AI models, businesses may be hesitant to adopt explainable AI solutions due to concerns about losing a competitive edge. There is often a trade-off between model interpretability and performance. As models become more interpretable, they may simplify or omit certain complex relationships in the data, leading to a potential decrease in performance. Addressing these performance limitations requires ongoing research and development efforts in the field of explainable AI.

Opportunities:

Rising education and awareness about AI

Education and awareness about AI create opportunities for the explainable AI market by fostering understanding, addressing concerns, promoting regulatory compliance, bridging the gap between technical and non-technical stakeholders, empowering users, and encouraging research and innovation in the field of explainable AI. Education and awareness initiatives can inspire researchers, developers, and innovators to explore and advance the field of explainable AI. By highlighting the importance and potential applications of explainability, these initiatives can attract talent, investment, and resources toward developing novel techniques and solutions. This creates a positive feedback loop, where increased research and innovation drive further growth in the explainable AI market.

Component Insights:

The solution segment dominated the market in 2022, the segment is expected to continue to witness a noticeable growth during the forecast period. The growth of the segment is attributed to the increasing adoption of AI technologies in multiple industries. Fraud detection is the major part where the explainable AI works. Explainable AI detects fraud and creates insightful solutions to it. In the technological era, cybercrime is one of the major challenges for the government as well as private organizations.

The service segment is expected to grow at a significant rate during the forecast period. The growth of the segment is attributed due to the increase in the services regarding the AI platform. The AI consulting services work to help the organization adopt AI solutions that are interpretable, transparent, and accountable.

Deployment Insights:

The on-premises segment holds the largest share of the market with the largest market share. To build explainable AI on-premises, businesses employ a variety of methods, including rule-based systems, decision trees, and model-based explanations.  Due to its security advantages, major businesses choose XAI installed on-premises across a variety of industry verticals, particularly in the BFSI, retail, and government sectors. The system employs machine learning to evaluate massive amounts of data, spot possibly fraudulent activity, and offer concise and honest justifications for its judgments.

Application Insights:

The fraud and anomaly detection segment dominated the market in 2022. The segment is expected to maintain growth during the forecast period. Fraud and anomaly detection often require a combination of machine-learning algorithms and human expertise. Explainable AI models facilitate collaboration between human analysts and AI systems. By providing interpretable outputs, these models enable analysts to identify patterns, generate insights, and contribute their domain knowledge to enhance the overall detection capabilities.

End-Use Insights:

The IT and telecommunications segment dominated the market in 2022, the segment will continue to grow at a significant rate during the forecast period. The It and telecommunications sectors generate massive amounts of data from multiple sources, the data is valuable for training AI models. Explainable AI solutions enable these sectors to leverage their data effectively and derive actionable insights. The requirements for consumer interactions and network logs from the IT and telecommunications sectors support the growth of the segment.

On the other hand, the retail and e-commerce segment will grow at a robust pace during the forecast period. Along with a globally expanded consumer base, e-commerce businesses are susceptible to fraud. The risk in online transaction fraud and inventory management has raised the requirements for explainable AI solutions and services by retail and e-commerce businesses.

Regional Insights:

North America dominated the global explainable AI market in 2022, the region is predicted to maintain its dominance during the forecast period. The rapid adoption of technology along with the presence of massive information technology (IT) infrastructure supported the growth of the market in North America. The nations such as the United States and Canada are observed to be the largest contributors to the market. The willingness to adapt advanced technologies for operational solutions and services by multiple industries/end-users promotes the growth of the explainable AI market in the region.

On the other hand, Asia Pacific is expected to be the most attractive region for the explainable AI market during the forecast period. Favorable economies, emerging technological hubs, adoption of generative services, and the presence of key players to promote technological advancements are a few factors that are expected to accelerate the market’s growth in the Asia Pacific.

Multiple technology-based startups and companies in the region are actively involved in the development of explainable AI solutions, the market in Asia Pacific is witnessing fierce competition which is observed to lead the introduction of advanced AI-based services.

Recent Development:

• In June 2023, Reprocell announced the launch of advanced commercial services ‘Pharmacology-AI’. The launch of new services was followed by the completion of the first excellerate project by the National Center for Digital Innovation.
• In June 2023, IBM announced the launch of a new platform for organizations ‘IBM Watsonx’. The new platform released by IBM allows companies to accelerate operations with artificial intelligence solutions.
• In May 2023, the Singapore government collaborated with Google Cloud, to make the availability of artificial intelligence to the public sector agencies in the city-state through the new AI cloud platform.
• In May 2023, the government of Singapore announced the collaboration with Google Cloud. The collaboration aims to assure the availability of artificial intelligence platforms for public sector agencies through AI cloud platforms.

Explainable AI Market Companies

• Amelia US LLC
• BuildGroup
• DataRobot, Inc.
• Ditto.ai
• DarwinAI
• Factmata
• Google LLC
• IBM Corporation
• Kyndi
• Microsoft Corporation

Segments Covered in the Report:

By Component

• Solution
• Services

By Deployment

• Cloud
• On-premises

By Application

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

By End-use

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

By Geography

• North America
• Europe
• Asia-Pacific
• Latin America
• Middle East and Africa