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Is Hype of Artificial Intelligence in Lending Sector Really Worth It?



Artificial Intelligence (AI) and Machine Learning (ML) are having a significant impact on how industries work. From speech recognition and robotic process automation to driverless cars and virtual assistants, the extent of its influence has brought us from a mobile-first world to AI-First. Business leaders believe that AI is going to play an important role in the future.

Artificial Intelligence allows companies to unbind the hidden value in their core businesses. Machine oriented neural networks can understand a billion pieces of data in a fraction of seconds, providing the ideal solution at the fingertip of decision-makers. Your data is regularly being updated, which indicates that your ML model will be altered too. Your organization will always have access to the latest and updated data, including important insights that can be used to quickly changing business needs. There is no doubt about it that many FinTech companies have cut down the costs of credit loss to find the right borrower through Machine Learning Applications.

Banks and financial institutions have been in the business of deciding who is eligible for the credit for centuries. But in the time of Artificial Intelligence, Machine Learning, and big data, digital technologies have capacity to change lending activities in positive as well as negative ways.

How AI Can Help in Lending?

Lending activities of all kinds such as a mortgage, credit cards, student loans, short term loan , personal loan etc is a data-driven environment. We can say, at its core, lending is undoubtedly all about ‘big-data’.

For example, in a typical personal loan case, we evaluate the borrower’s credit record, income, employment, property, tax, insurance details, and more than thousands of data are recorded during the lending process. This is a time taking and expensive procedure and for many lenders, a cumbersome and an extremely manual process. And it is very hard to determine how much of this data is even reliable and relevant. How much of it is going to be useful in foreseeing applicant’s behavior during the application process, approving, sanctioning and repayment stages?

By using more data and analyzing customer becoming a defaulter, the credit checking system can examine the behavior, hence helping lenders to make a wise decision based on data.

FinTech companies need to go deeper into insights to grow their business, manage risk, and gain more market share in the highly competitive lending market.

Ways AI Can Make an Impact in Lending Market

  • It can reduce the loss of a lender and cut the cost by use of a machine.
  • With proper creditworthiness check with an advanced machine, loss of credit can be prevented.
  • Use of AI and ML can help in reducing fraud.
  • Lending companies can provide greater customer satisfaction with the use of Chatbot and personal assistants.
  • It can help in reducing write-off of loan.
  • Very low diligence cost.
  • With the lower loss, Fintech companies can expect high revenue.
  • With the use of Chatbot and digital assistants, servicing cost can come down.
  • Any future risk related to non-repayment or loss can be avoided with proper data analysis.

The Future Ahead

By now it must be very clear that Artificial Intelligence and Machine Learning are the future of lending. Advancement in technology is drastically changing the lending activities, and it is important for lenders to stay updated with the emerging technological changes and adopt them actively. Technology is no longer a hurdle and customers these days are very receptive to these changes. Customer no more wants the same old and traditional experience; they want secure and convenient solutions that meet their financing needs.

It is therefore vital for lenders to create a digital lending environment that goes beyond an online application to provide a data-driven digital process through Artificial Intelligence-powered devices.

Artificial Intelligence and Machine Learning have allowed key players in the lending market to makeover, both regarding front end and back end process drastically. From reduced cost to streamlined operation, both AI and ML will continue to make the way for the lending industry.
The purpose of AI has always been to make lives better and to improve the way we work. Artificial Intelligence can revert the cycle of low profit through intelligent automation and innovation. Advancement in computing, algorithms, cloud services, analytics and other technologies are helping AI to grow. However, AI’s full capacity can never be realized until companies show willingness to take more risks and start to experiment with Artificial Intelligence technology robustly.

Description: AI has the potential to transform the lending activities in a better way. With proper implementation and use, lenders can keep track of their potential loss and risks.