May 21, 2021 ●12 min read
How AI is Changing the Lending Process?
Lending is an enormous business which impacts the economy in direct or indirect ways. From the poorest to the richest, most of the people are involved in the lending process in one way or the other. It may be borrowing or lending money for business, agriculture, housing or even purchasing goods on EMI. So, we can understand that a huge amount of money is involved in lending business and equally huge size of data is also involved. Use of computers and digital tools has made this job quite easier.
To handle money and business these days, banks and Non-Banking Financial Companies are using Artificial Intelligence i.e. AI these days.
In simple words we can say that Artificial Intelligence is an interdisciplinary science which enables us to build smart machines which are capable of performing the tasks usually requiring human intelligence.
As Banks and Non-Banking Financial Companies own a lot of data and lending is based on the consumer's credit history and creditworthiness, Artificial Intelligence becomes all the more important for the Lending Industry. Artificial Intelligence can help in knowing the creditworthiness of an individual or business easily. It can help in the value assessment of the collaterals such as home, car or other valuables. Artificial Intelligence can analyze the data available and help in decision making.
In the lending business, unsupervised Artificial Intelligence is much more relevant than the supervised Artificial Intelligence. In unsupervised Artificial Intelligence, rules are not created by the humans in the beginning. An enormous amount of data is fed by the data scientist and then Artificial Intelligence identifies the patterns across the data of the millions of individuals.
Let us understand how is Artificial Intelligence benefitting the Banking and Non-Banking Financial Companies:
● Artificial Intelligence has helped in making the routine processes automated.
● Increase in the speed of service has been seen because of Artificial Intelligence.
● It can process the big volumes of data accurately.
● Routine and uniform work i.e. chat with customers, analysis of transactions and loans, round the clock support etyc. is performed by bots (Artificial Intelligence) as a result employees can devote themselves to more creative and complex tasks.
Before lending any money or approving any loan, the credit score of the borrower is checked. To assess the credit scoring of the customer, its solvency and intention to repay debt is assessed. This assessment is based upon the data available which gives out a fair idea of the customer’s total income, length of its service, transaction details and its credit history as well.
Using Artificial Intelligence, all this can be done more efficiently and quickly as credit scoring is a mathematical model based on statistical analysis.
Banks and Non-Banking Financial Companies are using Artificial Intelligence for approval and issuance of instant personal loan. Artificial Intelligence checks the credit history of the borrower in almost no time, paper work is also completed quickly and if the borrower is found eligible, the loan is approved and issued immediately. So, Artificial Intelligence cuts the time and costs both and has lowered the defaults also.
COVID-19 Pandemic has increased the demand for loans more than ever. Pay-cuts and downfall in business has forced people to borrow money. Not only banks but Non-Banking Finance Company in Nagpur like Zavron Finserv are helping to overcome the problems by offering loans during the pandemic to the people who have a good credit score. Artificial Intelligence is helping in quick dispersal of the loans in the times of need.
Artificial Intelligence has impacted the lending process immensely. Use of Artificial Intelligence in credit scoring saves the costs and time of the company.
It has helped to increase the profit of the company as the risk of the loan defaults has come down immensely because loans are granted after the thorough scrutiny of the available data. So, the company has the least chances of losing their money.
Artificial Intelligence is helping in quick dispersal of loans as paperwork is completed swiftly after confirming their eligibility and approval and amount dispersal is completed in almost no time using Artificial Intelligence.