[POWER TECHNOLOGY]
THE UNTAPPED POTENTIAL OF AI IN LENDING ACTIVITIES. HOW AI IS MOVING LOAN OFFICERS FORWARD.
The lending and banking industry over the last several decades has experienced an unprecedented change. Lending is such a vast industry, and it impacts directly and indirectly almost every part of the economy. The days when people used to complete their transactions in person at a bank or maintaining all personal finance records as paper documents are far much behind us. Today, we see an upward trajectory of electronic document management systems. Third-party credit reporting and rating systems rise each day, allowing banks to quickly process the loan applications and other consumer inquiries without the need of much human effort and interaction. Tens of millions of Americans hold loans that are worth trillions of dollars, as such, any technological move that can make even a small improvement in the company’s returns on the investments they hold, or that can improve their share of the market, would be worth a lot. While it is true that the banking industry has grown so much over the years, there are still leaps and bounds of improvements that need to be adopted and maintained across the 34 l
board. New technologies today are looking at the ways through which to reduce the human effort required in the analysis of different algorithms to establish a pattern in the consumer behaviors and also to extract data from documents to answer questions that are required to complete a range of banking transactions. Rather than focusing on form completion and transferring data, the mortgage underwriters will be available to spend more time examining the loan applications and credit assessment at a higher level. To achieve this, it would mean that decisions to extend credit will involve fewer risks and will be made available to more worthy borrowers. This is why both the established banks in America and throughout the world and startups in the lending industry feel the need to look for new ways to innovate constantly. To fill that gap is artificial intelligence. According to the AI, Opportunity Landscape research by Emerj shows that approximately 15% of the venture funding raised for the AI vendors in the banking industry is for lending solutions. At its most basic, the lending industry is a big data problem. This means, to fill the gaps therein in the industry, it has to adopt big data and machine learning. To process the value of the loan, the creditworthiness of a person is vital. The more data you have about a person, the better chances you have to assess their creditworthiness. Also, machine learning and AI allows mortgage underwriters to focus more on examining the loan applications and credit assessment at a higher
level. Ultimately, this means that the decisions to extend credit will be less risky and available to more worthy borrowers. The high producing loan officers understand this simple logic that AI is the next phase in lending. It is an opportunity that offers multiple potential benefits for the industry. However, that potential is yet to materialize fully. According to National Mortgage News’ 2020 Top Producers, which answered how Artificial Intelligence affects the way they do or have been doing business right now. In last years’ survey, AI stood among the most listed responses on the initiatives bound to make waves. With the COVID-19 crisis expected to worsen into the spring, the urgency may intensify around mortgage companies’ intent to become digitalized, automated, and more informed on the opportunity AI represents. AI represents a risk for most jobs, but most advocates argue that tech is the most likely and should be used as an adjunct to workers. The longer it is used in the industry, the more systems learn, the higher the chances of the technology absorbing more mundane tasks, circumventing human error, yielding a faster and easier lending process over time. While AI adoption and utilization in the lending industry sits in the nascent stage of use, sentiments towards the technology split into two, according to the Survey by National Mortgage News. About 59% of the loan officers in both the Midwest and South said they don’t use AI technology, and they don’t believe
THE POWER IS NOW MAGAZINE | APRIL 2020
