Interactive web-based connections have almost entirely taken over face-to-face communication. The impact of AI is all-pervasive in our day-to-day lives. All industries have now incorporated it into their operations, and lending businesses are no exception.
The financial deregulation led to a sea of changes in the banking and financial services industry with the mushrooming of many Internet-based financial and lending institutions. This, in turn, has led to the digitisation of financial transactions, including the entire process of lending, right from the initial loan application to the final disbursement, and all the stages after that too.
The ease of applying for loans, and the availability of truckloads of data related to the applicants, has led to a profusion of opportunities for lending institutions. It is now possible to get insights from this data, to make loan management simpler, with the help of sophisticated analytical tools thanks to AI!
Let’s take a look at some of the important conveniences that AI has provided to lending companies…
Here’s How Lending Businesses Have Benefited From AI…
AI can help lending institutions know their clients better. For instance, customers making a call need not wait in the queue to be serviced by a customer service agent. Instead, AI-powered chatbots can deliver prompt service and also serve multiple customers at a time.
Further, by getting individual customer data, meta-analysis can be conducted to observe customer behaviour patterns and the loans can be specifically tailored to meet customer requirements. This will help in increasing profitability, and targeting a wider customer base.
2. Preliminary Screening:
Screening loan applications based on various credit models helps in minimising the enormous amounts of clerical efforts that make loan management a nightmare. With the operational tasks being taken over by AI, the company saves a tremendous amount of time, and teams can concentrate on the more critical aspects of the lending process.
3. Credit Scoring:
Lending companies depended on a single credit score to assess the repayment abilities of the loan applicants earlier. With the advent of AI, alternate credit scoring methods such as metadata analysis through a smartphone using AI and Machine Learning give an insight into consumer behaviour and their spending patterns, thereby giving an estimate about the person’s ability and earnestness to repay the loan. The turnaround time in processing loans has significantly reduced owing to the ease of decision-making, thanks to this feature.
Finezza, a complete loan origination and lending process management platform for fintechs, uses AI-enabled credit rating to assess a loan applicant’s creditworthiness. The software comes equipped with detailed credit analytics (integrated with 4 credit bureaus), KYC documentation & analysis, bank statement analysis and 360° loan eligibility assessment.
4. Fraud Detection:
Among various cyber crimes, loan stacking (customers taking multiple loans from multiple lenders) is a common phenomenon in the lending business. AI helps to identify suspicious and unusual behavioural patterns of the loan applicant, and thereby helps to identify fraudulent practices. For instance, if a customer has multiple loan apps installed from various lenders, AI can detect this and thereby flag the customer given his possibility for loan stacking.
On the other hand, lending companies can also take steps to keep the applicant’s data safe and prevent security breaches, using AI-enabled solutions.
5. Lowers Due-Diligence Costs:
AI is capable of comprehending billions of data in seconds and at the same time, keeps updating the data as well. This feature enables lending firms to minimise their due diligence expenditure significantly. Firms would otherwise have to manually sweep through numerous records starting from the prospective borrower’s credit history, his employment and his source of income, payment of taxes, assets, and so on to arrive at a decision as to whether he will be eligible for the loan, and whether he has the capacity to repay the loan installments on time.
Furthermore, such data needs to be updated at regular intervals if the loan is sanctioned, to track the buyer at all stages right from application to disbursement. Forecasting and updating such borrower behaviour manually is an extremely time-consuming and cumbersome process and prone to human error.
Finezza uses AI to offer access to data and insights across all stages of the lending lifecycle to all stakeholders. With Finezza, data can be processed in seconds and updated in real-time, leading to more effective loan management. Further, they are designed to enable easy integration with legacy and existing systems via APIs and customisable data export.
AI also helps to minimise the underwriting costs greatly. Additional benefits of AI include lesser write-offs and enhanced risk adjustment margin.
Here’s how Finezza helped Gromor Finance, a lending company, optimise their loan management process!
How AI Helps Both, The Lender And The Borrower…
Various AI-based solutions help to map the lender’s profile with that of the borrowers’ requisites, thereby eliminating the need for a detailed application process to be made by the borrower with various lenders. This helps in accelerating the entire process of loan disbursal.
Further, with the emergence of various smart lending applications, the lenders feel less burdened as the process of background checks, and credit monitoring is entirely digitised, and the borrower is also able to find his / her credit score in minutes and connect with a lender immediately.
From a lender’s perspective, AI-enabled smart tools help to verify the borrower’s data simultaneously across various online platforms and help the lenders in decision-making, while from the borrower’s point of view, it helps in submitting forms online and easy online verification, thereby facilitating loan disbursements in a couple of days.
Finezza utilises its exclusive AI technology to offer customised analytical solutions that enable better decision-making with respect to loans, and minimise the lead-to-loan TAT and also evaluate creditworthiness effectively, making it easier for borrowers to get loans without much delay.
Artificial Intelligence (AI) is undoubtedly here to stay, especially when it comes to the lending companies. With benefits like cost reduction and better-streamlined operating procedures, AI will only lead to better lending outcomes!
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