The Current + Future Role of AI in Lending

The world of fintech is lightning-fast, and technology is even faster. The past two years have seen an incredible rate of improvement and adoption of artificial intelligence (AI) for all industries. In the lending sphere, this is hugely innovative. After all, most traditional lenders have been slow to adapt to the digital space in the first place, so bringing in AI tech is a huge step forward. It redefines efficiency, allows for sharp decision-making precision, and more.

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This time on the Business Warrior blog, we will look into the multifaceted impact of AI on various aspects of lending, from underwriting, advertising, fraud detection, modeling, forecasting, data utilization, strategic outsourcing, and transformative communication strategies.

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AI & Underwriting 

The core transformation for the fintech lending ecosystem is reimagining underwriting processes. Underwriting no longer needs to be one hundred percent managed by underwriters during office hours. With the infusion of AI and machine learning algorithms, complimentary underwriting workflows can be developed, making loan processing faster than ever before. 

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Real-time analysis of vast datasets expedites decision-making and ensures a more nuanced and informed approach to risk management. AI allows for personalization and guidance throughout the process (more on that later,) as well as a precision in decision making that is unparalleled – because it’s building off of millions of points of data.

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The result is a streamlined approval process that balances speed with accuracy, paving the way for a new era in lending efficiency.

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Efficiency means profitability.

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AI & First-Party Data

First-party data is any information you are able to collect from your own subscribers, customers, and site visitors whenever they make a purchase or engage with your site or marketing. For lenders this includes things like recent deposits, credit reports, trailing 12 month bank balances – all useful info!

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First-party data, often viewed as the lifeblood of the lending industry, undergoes a metamorphosis with AI integration. Machine learning algorithms tirelessly mine for insights, discern patterns and predict future creditworthiness based on historical data. This dynamic process allows lenders to tailor loan products with surgical precision. This gives customers an unparalleled experience, with a deeper understanding of their financial profiles. The era of truly personalized lending experiences has dawned, driven by AI's ability to aggregate vast pools of data and unlock the potential within.

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Leveraging AI through Outsourced Technology

To stay at the forefront of innovation, many lending companies are strategically outsourcing their tech and AI capabilities with it. This approach optimizes costs and empowers organizations to access cutting-edge technology without the burden of hefty upfront investments to develop. Leveraging outsourced AI capabilities creates a strategic advantage, enabling companies to stay agile and adapt in the face of evolving market dynamics. This is especially true of AI-based technologies, as hundreds of companies are pushing the limits of what’s possible. 

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How Does a Small or Medium-Sized Lender Use AI

What about small to medium-sized lenders? Most of them are probably being told right now “Oh, you can’t use AI to enhance your business, you don’t have enough borrowers.” It’s true that you need to have a large size of borrowers, to create those vast sums of data to train and analyze AI systems. So, we ask again, how do small or medium-sized lenders take advantage of this new tech? 

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You use a platform like PayPlan. While individual lenders may only have a few thousand borrowers, when a dozen of them all use a platform like PayPlan those thousand join a larger pool of users, allowing small and medium sized lenders to get the insights they need that require hundreds of thousands of customers. The platform builds this repository of data and intelligence and leverages it to lenders, regardless of their own customer base size. 

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Lenders shouldn’t be expected to also change how computing works — that’s unreasonable. Work with those who are.

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AI & Communication

Effective communication has always been a linchpin in the lending industry, and AI is transforming the way lenders engage with borrowers. The old days of basic answering machine trees and button presses are in the past. The integration of chatbots, fueled by natural language processing, has become a game-changer. These sophisticated bots handle customer inquiries, provide real-time support, and seamlessly assist in the application process in a way that’s more natural and useful than the old basic prompt styles, “Say ‘HELP’ if you need help.” The marriage of AI and communication not only improves operational efficiency but also enhances the overall customer journey by ensuring timely and accurate interactions at every stage of the lending process and assistance when the customer needs it, no matter the time.

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The Future Landscape

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The future of AI-integrated anything is looking pretty bright. Predictive analytics, powered by increasingly sophisticated algorithms, will empower lenders to anticipate market trends and recalibrate strategies proactively. Advanced credit scoring models will evolve, incorporating a broader spectrum of data sources to provide a more holistic and accurate view of a borrower's financial profile. The rise of explainable AI will further enhance transparency, fostering trust and understanding between lenders and borrowers.

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Want to get really wild with it? AI can be used to control every piece of your process and pipeline, from advertising to repayment. All you will have to do is stipulate conditions and variables you feel are important and indicative of good business, and the tech will take it from there, acting on and learning based on the performance of those variables, iterating at a speed no human team could, delivering results faster, better, and more reliable than ever before.

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AI could build a profile based on your best borrowers and the first-party data you acquire for them, taking it and then auto-generating targeted and personalized advertising materials to display to other potential customers that meet those criteria. It could then generate communications specifically unique to those customers and move them through the pipeline with ease, without any extra input or man hours from you!

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The current role of AI in lending is incredible, and what’s coming in the future is sure to be nothing short of revolutionary. Lending companies embracing and leveraging AI are not just staying ahead of the curve but shaping the curve itself. Driving innovation and delivering sophisticated lending experiences that will set new standards in the financial landscape. The journey towards a technologically empowered future in lending has only just begun, and the possibilities are as limitless as the data AI processes to fuel this evolution.

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To leverage AI in your business, you can do a few things. If you want to wait up to a year to begin reaping the benefits of a smarter, enhanced process, you hire developers to start programming components and modules that rely on AI to enhance your existing processes. We’ll see you in six months to a year after you get that built and all the kinks ironed out. Or you can start enhancing your business today! Leverage existing tech that has already spent years developing, refining, and testing to deliver results intelligently and quickly. 

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It’s an exciting time to work in fintech.

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Work with PayPlan and get online and processing as fast as one month,

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