AI can serve many fields, but the financial industry is poised to reap some of its greatest benefits. As you’d probably know, the loan approval process is painfully long and fraught with errors, especially for lenders that rely on manual processes of entry and review. AI offers opportunities to speed up this process, improving its accuracy and eliminating many of the problems that plague the lending world.
Application Processing
Processing a loan application is a resource-intensive part of loan origination. For a typical application, borrowers must submit proof of identity, statement of income, existing debts and other financial declarations. These documents are provided either in person or digitally. AI can hasten the process by quickly analyzing the information contained in the documents, highlighting concerns or inconsistencies for a loan officer to review. The result speeds up response time, helping move things significantly faster than usual.
Credit Assessment
Lenders rely on traditional credit reporting and scoring models to determine creditworthiness of applicants. Oftentimes, these systems lack the nuance required to assess the viability of lending to a wide range of applicants. By reviewing customer data and using predictive analytics to determine which applicants make the best clients, AI can overcome these limitations.
Although it can provide this information for virtually any applicant, the best results are offered when evaluating applicants with non-traditional credit.
Risk Evaluation
Risk evaluation is a critical step in the initial application and underwriting process. Both of these can be improved with AI.
Typically, the risk evaluation process involves a thorough assessment of the applicant’s credit, debt, income and assets. Risk evaluation relies on data to determine the best loan amount, interest rate and term for concerned cases. AI’s quick handling of documents through fast-track verification and creation of comprehensive risk profiles can shorten the process significantly.
Fraud Detection
Preventing loan authorization under fraudulent circumstances is an important goal for lenders, and AI can assist. It can process data in the applications and weigh it against other details to measure authenticity. This can be used to create a unique fraud score, which the lender can then use to determine illegitimate applications.
Although identity theft is a common instigator for loan fraud, an even more concerning trend is misrepresentation in loan applications. AI’s consistent review of data helps reduce chances of occupancy misrepresentation and other fraudulent practices.
Transaction Management
Once a borrower receives loan money, use of AI can be strategically shifted to transaction management. Borrowers require a repayment plan with clear information about how, when and what amount they need to pay at each billing interval. AI can create this customer-centered transaction management system, providing convenient payment reminders and alerts to ensure timely repayment. It can also organize data to show payoff timelines and other info for lenders and account holders.
Customer Interaction
Although AI cannot completely replace the human touch in the loan process, it can streamline and simplify many aspects of customer service. For example, AI chatbots can answer simple, commonly asked questions that borrowers have about payments, late fees and such things. Furthermore, an AI-driven system can create real-time reports upon customer request, helping them understand their progression toward a final payoff. These actions limit the time customer service representatives spend addressing routine requests, so they can devote more time to resolving complicated customer concerns.
Default Evaluation
Predicting when customers are likely to default on an application and creating solutions to get them back on track are tasks best done by AI. AI uses predictive analytics to devise profile factors that increase the likelihood of missing payments, change of payment plan or broad economic changes that could impact the borrower. Based on this data, AI can configure alerts, reminders and support calls that can potentially prevent a customer from defaulting on payments. In case of defaults, it can made recommendations around repayment that are proven to have worked.
Loan Portfolio Management
Assessing a loan portfolio involves a comprehensive evaluation of risk and potential. Online lending software provide up-to-date reports focused on the performance in each class allowing lenders to determine the best way to optimize portfolios for the future.
AI has the potential to shave days, even weeks off the loan origination process. Strategic implementation of the technology can result in increased efficiency of the process, as well as reduced risks for lenders.
