FinTechTalk: How the credit industry is embracing AI 

Is the credit industry lagging behind? 

The credit industry has a reputation for being a late adopter and there are certainly challenges to AI deployments in the credit industry. The industry, however, has been using AI-powered solutions in credit scoring, for 15 years. What the emergence of gen AI has changed is the speed at which these things can now be done.  

 

Where can AI make an impact? 

Proactive surveillance, which is a different methodology from early warning systems widely used today, is an area where AI can become a game changer in credit. The second area is making the research process more efficient with the help of external tools or ones developed internally. Thirdly, credit memo generation leveraging AI is also an emerging and promising use case.

 

Financial data and technology providers invest a lot in developing out-of-the-box tools for these use cases. Some financial institutions are trying to leverage AI to make their services more inclusive for both i individuals and businesses. Banks are also deploying AI-powered technologies to make the shift from point-in-time approval to continuous risk monitoring.  

 

Even big banks rely on service providers to deliver AI deployments, although there seems to be a shift towards in-house development too. Open banking provides a wide range of data sources to rely on for credit decisions but it’s up to the customer to decide how much they want to share. However, it’s probably better to communicate these options to customers or – in the case of a credit union – members without referring to technical terms such as AI and open banking. Regulators should also listen to the industry during the legislation process to mandate rules that can provide the right framework for the development of the industry.  

 

The panel’s advice 

• How the credit industry can use the AI tools provided by developers is expected to crystallise in the next 12 months.  
• It’s not a bad thing that businesses implement AI relatively slowly, from the ground up involving subject matter experts.  
• Surveys show that even Gen Z prefers human interactions during onboarding to automated processes. Humans can’t be taken out of the equation. 
• Globally, the adoption of AI is in direct proportion to the maturity of data privacy regulation and governance in that jurisdiction.  
• When deploying AI, identify what outcomes you want and start small.