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How AI is Affecting the Lending Industry

14 Oct 2021
Ai affecting Lending Industry blog post

As computers get smarter, some people worry they will replace humans. But the truth is that smarter computers mean easier, more efficient, and often more lucrative work for humans.

Artificial intelligence (AI) can mimic human intelligence, with the ability to recognize, contextualize, and analyze data. As back-office systems collect more and more data, business users are able to leverage that data to mitigate risk, streamline processes, and boost profits.

Data and analysis are at the center of the lending industry: Think about how much data lenders collect and maintain on all borrowers and applicants, including financial information and payment history. Modern automation and AI are already using that data to play a role in changing the lending industry landscape. Here’s a look at a few modern examples of how AI is affecting in the lending industry.

Detecting Fraud

While humans are capable of empathy, relationship building, and decision-making that a computer can never master, a human can easily overlook a fraudulent document or an inappropriate transaction. That’s why humans and machines make good partners in detecting fraud.

AI can quickly identify suspicious patterns or illegitimate documents and transactions. AI can add support, where human error is likely to happen, allowing lenders to detect more fraud and freeing humans to focus on what they do best.

Making Credit Decisions

AI also can help make informed decisions on credit scoring and risk assessment by analyzing a significant amount of data quickly and accurately.

Increasingly, lenders are interested in making loans to individuals who may not have a FICO score or who have a limited credit history, such as in economies with an emerging middle class or in younger populations like college students. In those cases, AI can be used to measure other data that can predict creditworthiness, such as online behavior or mobile payment history, reports Forbes.

Automating Processes

While AI can easily handle much of the repetitive and time-consuming parts of the lending process, it can also manage tasks that require higher-level analysis. For example, processing documents used to take hundreds of hours or more, but with AI-powered intelligent document processing (IDP), the same work can be completed error free in mere minutes.

Using AI to automate processes doesn’t just reduce costs significantly, but it also allows lenders and finance professionals to use their time focused on more cerebral tasks.

Eliminating Bias

Historically, lending decisions have often been driven by inherent procedural bias, and lenders are more committed than ever before to eliminate that bias and make more equitable lending decisions. AI can help achieve that goal.

For instance, AI tools can institute algorithms that aim not just to match historical data but also to achieve a measure of fairness, according to the Harvard Business Review. By deploying an AI solution that is designed to avoid bias, lenders can circumvent any inherent human biases in making loan decisions. A recent NYU Stern research report, which was based on lending data from the SBA and Ocrolus, showed how automation can play a major role in eliminating bias in lending decisions.

Harnessing the Power of AI

The data-rich lending industry is ripe for taking advantage of the opportunities AI presents. By using computer learning to improve fraud detection, credit decision making, process automation, and bias elimination, lenders can become more efficient, effective, and profitable.

The Ocrolus platform makes it easy for lenders to access the power of AI to manage these processes and scale their operations. Learn more at Ocrolus.com