bankingciooutlook

Intelligent Online Lending with the Aid of Big Data and AI

By Banking CIO Outlook | Wednesday, October 31, 2018

With the increase in digitization, financial companies are driving towards the latest technologies for online lending services. In the traditional process, the lenders are dependent on credit scores, which is an imperative part of the financial sector used to manage and evaluate maximum loan amount. Moreover, risk evaluation is found to be a crucial task during the lending process. But, with the promises of big data and AI to analyze the individual credentials through the past payment history, credit amount and total period can be easily known to repay the amount through fixed tenures.

Rapid growth and prevalence has introduced both big data and artificial intelligence in almost all economic sectors and holds the key for future lending services.  Peer-to-peer lending process is employed in which, peer lenders transfer the amount to the consumer through an online platform. UPSTART, a California based company is an online platform employing artificial intelligence technologies along with machine learning protocol for lending loans. Through machine learning, a huge amount of collected data are correlated and processed to extract effective features. Otherwise, through a manual process, the data are hidden or gets unnoticed. Apart from UPSTART, another Chicago based startup, Avant, has offered unsecured loans of around $1,000 and $35,000 to those candidates, whose credit score is within the range of acceptable limit, through artificial intelligence technologies.

These machine-learning algorithms are also helpful in customer fraud detection. Through AI-based platforms, the developed algorithm evaluates consumer data by considering features such as time considered to answer the application questions, contracts agreement, and reviews provided on pricing option.

However, due to its initial stage of development in the financial sector and security aspects, not all the company is dependent on online loans. For example, many of the online-related applications require a particular app to be downloaded which collects all the personal data of the customer.

In summary, it can be seen that privacy and data security are the key issues in analyzing the online lending process. Moreover, clients are not convinced in sharing their personal information online. Even by deploying artificial intelligence and machine learning techniques, data security is a critical concern which both lenders and clients are facing. In future, leveraging blockchain technology along with AI will help in maintaining the trust between the lenders and their consumers.

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