How AI is Transforming the Digital Lending Landscape?

James Robertson, Banking CIO Outlook | Monday, September 21, 2020

Electronic document management systems and third-party credit rating systems enable banks to process loan applications faster and other consumer inquiries with fewer efforts from humans.

Fremont, CA: The banking sector has seen a major transformation over the past years. Traditional financial processes are now replaced by digitalized systems. Although the banking sector has evolved, there are still some improvements required across the board. By concurrently processing various algorithms to determine patterns in consumer behaviors and obtaining data from documents to answer questions will reduce humans' inputs to complete different banking transactions.

Here are five uses of AI in the lending sector:

Digital Footprint Analysis Using AI

Artificial Intelligence (AI) gathers information about an applicant's digital behavior like the profiles of people they interact with more on social media, variable employment information, spending habits, and major organizations they belong to. This information can supplement and replace a credit score as the final factor in deciding whether to extend credit to an applicant.

Machine Learning Provides Credit Insights

The algorithms implemented in machine learning can examine non-numerical factors in evaluating an applicant's creditworthiness like their consumer behavior in other industries and social media activity. These latest credit scoring tools provide better insights into applicants' willingness to pay their debt, resulting in the extension of credit to deserving applicants.

Enhancing Risk-Adjustment Margins with AI

Top 10 Lending Management Solution Companies - 2019Implementing AI can accurately find the appropriate interest rate to charge on a consumer loan. Banks can effectively take advantage of their assets to optimize profits with the help of AI software in extending credit to deserving borrowers with an appropriate interest rate that will enable them to continue making payments in time on their loans.

AI and Risk Reduction

The utilization of AI in a bank's loan system decreases the chances of human error in processing a loan application or ignore the vital factors in determining if a borrower will default on a loan. AI also plays a crucial part in the bank's loan management system to distinguish patterns of behavior that shows if a customer may be close to declaring bankruptcy or defaulting on the debt. It will help banks save costly losses and retain credit availability for deserving borrowers who will become or continue to be economic participants by minimizing those risks.

Missed Opportunities from Relying on Credit Scores

Missed opportunities developed by banks' dependence on credit scores to access an applicant's creditworthiness limits consumers' economic activities and reduce the bank's profit potential.

See also: Top Artificial Intelligence Solution Companies

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