4 Ways AI Is Helping Lenders Grow Faster and Smarter

Technologies backed by artificial intelligence (AI) are impacting the lending industry. Today’s AI lending tools are powerful enough to scan through a customer’s financial information and determine their creditworthiness, even if they don’t have a traditional credit history.

If you own or operate a lending business, such as a bank, a credit union, a fintech firm, or a financial institution, consider adopting AI-powered lending tools. They can supercharge your overall efficiency — from day-to-day operations and risk assessment to security and client acquisition.

Streamlining Essential Application Processes

Present-day artificially intelligent tools are designed to analyze and process vast amounts of data, reducing or eliminating the need for manual reviews. They can also collect new data in real time and analyze patterns in the information.

These capabilities are highly desirable in the lending industry, allowing a lending institution to quickly analyze a potential borrower or customer’s financial history. An AI lending tool can process traditional data sources, like bank statements and credit scores, and non-traditional data, such as social media activity or utility payments.

Leveraging traditional and alternative data sets lets AI tools provide lending institutions with the means to develop tailored risk assessment models. This helps streamline the loan application process, improve application speeds, and accept more potential customers.

Finding and Acquiring New Borrowers

When dealing with traditional lending institutions, many potential customers are turned away from loan applications due to insufficient financial data. Examples of data underserved and underbanked customers frequently lack include:

• An established credit history
• Sufficient bank account data usage
• Regular employment history or income sources
• Inconsistent tax records

AI lending tools can go beyond these data sets and explore alternative sources of information. They use various tools to identify, target, and acquire potential borrowers. Examples include:

• Targeted marketing techniques. AI lending tools may use targeting techniques similar to those used in the digital advertising sector, such as digital behavior analysis, online profiles, purchasing history, and customer preferences. These techniques help lenders build potential borrower profiles and focus their efforts on specific populations.
• Predictive analytics. AI tools can use predictive analytics tools to analyze behavioral patterns and identify which potential customers are the most likely to need loans in the future. This is useful for risk profiling and finding individuals most likely to use your institution’s financial services.
• Creditworthiness modeling. AI lending tools can create a creditworthiness assessment using available data if a potential customer doesn’t have a traditional credit score or enough credit history. This feature helps target populations that conventional lending institutions may turn away, like part-time or contract workers.

Enhanced Fraud Detection and Prevention

Machine Learning (ML) tools can detect patterns in large data sets, making them well-suited for detecting unusual behavior patterns. These platforms use these capabilities to detect inconsistencies or potentially fraudulent behavior. This can include:

• Inconsistent personal information. AI lending tools can instantly identify discrepancies in personal information between sets of submitted financial data, such as name spellings, addresses, dates of birth, or Taxpayer Identification Numbers (TINs).
• Mismatched employment information. AI platforms can recognize whether a potential applicant’s employment details fluctuate, change, or appear inconsistent between each submitted document.
• Unusual banking activity. Although AI tools do not prevent fraudulent activity, AI lending tools can catch unusual data that may indicate suspicious behavior. Examples include frequent transfers between accounts, recurring large withdrawals or deposits, new accounts with large transaction volumes, or whether a potential borrower makes transactions from unusual regions or geographic areas.
• Unusual spending. AI tools can use reported income and known financial data to estimate a potential applicant’s financial capabilities. They can also detect whether recent spending patterns align with usual spending history and flag transactions that exceed a potential borrower’s means.
• Repayment patterns. AI lending tools can analyze a potential borrower’s known loan repayment history and find irregularities, such as irregular payment dates or unusual repayment amounts.

Also read: 6 Best AI Tools to Make Building Business Relationships More Easier

Personalized Customer Experience

AI platforms can power specific customer-facing elements of a financial institution, improving their experience and increasing the likelihood of conversion. These tools can use a potential customer’s financial information and past behavior to offer additional services, including:

• Providing personalized loan offers. A potential customer’s known financial history, spending habits, and product preferences provide an AI tool with everything it needs to create a custom loan plan. Customers are more likely to convert to customized loan offers because they are more likely to be relevant to their financial needs.
• Interactive assistants. AI tools can use additional technologies like Large Language Models (LLMs) and Natural Language Processing (NLP) to chat about loan offers with potential customers. These tools are more advanced than traditional chatbots with pre-programmed responses because they can answer specific questions in plain English.
• Future service prediction. Once a customer has accepted a loan plan, an AI lending tool will continue monitoring their financial activity for analysis. They may use predictive analytics to determine when a customer will likely need specific loan services, such as refinancing, and then reach out proactively with relevant, customized offers.

Improve Your Lending Business’s Operational Efficiency with AI in 2024

Leveraging the power of AI lending tools is essential for lending institutions to grow their customer bases. These tools improve operational and strategic efficiency at all levels. AI tools can enhance your day-to-day operations, improve the customer experience, increase your business’s resistance against financial fraud, and process loan applications faster and more efficiently to help you reach more borrowers and grow your lending business.