Consumer lending has been evolving rapidly in recent years, with technological advancements playing a significant role in the industry’s transformation. Amongst these new technologies, artificial intelligence (AI) has emerged and is helping lenders to provide a more personalized and accessible experience to their customers, whilst also making the lending process more efficient and robust. Here’s some elements of lending that we think it will help to improve:
Increased Efficiency in Loan Approval Process
One of the most significant applications of AI in consumer lending is the automation of the loan approval process. Traditional lending methods are often time-consuming and complicated, with numerous steps involved in the loan application process – especially for those lenders who still perform manual underwriting checks. However, AI-powered algorithms can analyse a borrower’s credit history, income, and other factors more accurately and quickly than humans can. This increased efficiency has the potential to make it faster for borrowers to obtain a decision from lenders – greatly improving the overall lending experience. Lenders can also benefit from time saving and reduced costs.
Credit Decisioning Insights
Given the nature of The Money Platform’s product, AI has never been used to process loan applications. Instead, TMP has always used its own automated credit decisioning scorecard to assess the creditworthiness of a borrower. Nevertheless, AI algorithms also have the ability to process large amounts of data and provide lenders with an insight into a borrower’s creditworthiness, enabling them to make informed decisions about loan approvals and interest rates – especially useful for rate-for-risk products.
Additionally, machine learning tools also give lenders the opportunity to make better informed, previously unnoticed, and more reliable changes to their scorecards. Primarily, machine learning technologies will help to reduce future bad debt rates and could also make TMP’s products more accessible to those who may have previously been rejected for a personal loan in the past.
Tailored Loan Offerings
Another way AI is changing the game in consumer lending is through personalized loan offerings. With AI, lenders can analyse a borrower’s financial history and offer customized loan products that are tailored to their specific needs. This includes loan amounts, interest rates, and repayment terms that are specific to the borrower’s financial situation.
By providing personalized loan offerings, borrowers are more likely to proceed with their loan applications after being approved, whilst also receiving the best possible interest rate. In turn, this can help lenders to build trust and establish long-term relationships with their borrowers, leading to increased customer loyalty and repeat business.
Improved Fraud Detection
Fraud is a significant problem in the lending industry, with lenders losing millions of dollars each year due to fraudulent activities. However, AI is changing the game by improving fraud detection in consumer lending. AI-powered, machine learning algorithms such as the AWS Fraud Detection Tool can identify suspicious activity, detect new accounts, and account takeover fraud more quickly and accurately than humans could ever dream of doing even if they tried.
As more of these advanced machine learning techniques are introduced, we can expect to see a reduction in the risk of fraud in consumer lending which will make the industry more secure for all parties involved.
Efficient Customer Experience
Currently, it is reasonable to expect a chatbot to assist with common FAQ’s as the technology has been around for some time already. With the power of AI increasing so rapidly though, the effectiveness of AI-powered chatbots should improve, leading to a more efficient customer service experience for the borrower. For example, instead of simply telling a customer how they should go about amending their payment dates, chatbots should soon be able to complete the borrower’s request along with any of the necessary administrative work themselves. As a direct benefit from this timesaving, the lender would then be able to allocate employee time and resources to other priorities.
AI algorithms could also help lenders to identify and address common pain points faced by their customers more quickly and efficiently, leading to improved customer satisfaction and understanding of their needs.
In conclusion, AI has the potential to revolutionise the consumer lending industry in many ways, making the lending process more accessible, convenient, and secure for borrowers, whilst also, making it more streamlined and profitable for lenders. As technology continues to advance, we can expect to see even more changes and improvements in the industry, leading to further gains for both consumers and suppliers. Additionally, as AI continues to become more advanced, it could be used to identify new lending opportunities that are not currently available. This could help to increase competition in the lending industry and give borrowers more choices over how they manage their personal finances. Overall, the future of consumer lending looks bright with the addition of AI.
