How AI is a Game-Changer in Lending
The finance industry is facing a rapid transformation, driven by the relentless advancement of technology, with Artificial intelligence (AI) at the forefront of this digitalization. While AI has proven to deliver real business value to organizations in every industry, an increasing number of banks, credit unions, and other lending institutions are taking advantage of the benefits that this modern technology delivers. This growing adoption is driven by the challenges the lending industry currently faces. With rising interest rates, reduced loan volume, and shrinking margins, lenders are looking for ways to improve operational efficiency and profitability. AI has proven to be the best solution to address these issues, providing a wide range of applications to automate manual and time-consuming processes, minimize errors, and accelerate decision-making.
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Hear ELASTECH’s CEO, Armen Tatevosian, and EVP of Global Operations, Jim Zordani, in a conversation about the benefits of using AI in Lending.
Where can Lenders benefit from AI?
Processing loan applications involves many manual tasks and time-consuming workflows. The need for human involvement not only reduces the profit per loan but also increases the risk of errors.
The use of AI in Lending enables organizations to swiftly scan and analyze loan documents, extracting and validating critical data points such as income, debts, assets, and employment verification. This automation eliminates the risk of human error and expedites the process, allowing loan officers to focus on strategic decision-making rather than mundane data entry. Leading applications of AI in Lending can scan more than 10,000 different loan document types and identify more than 2,000 data points with an accuracy of 99.99%.
Leading banks and credit unions have adopted AI for their loan underwriting processes. Well-trained AI models have proven to assess creditworthiness with unprecedented accuracy, considering a multitude of factors beyond traditional credit scores. This data-driven approach leads to informed decisions that minimize the risk of defaults and maximize portfolio performance.
The use cases of AI extend even beyond the initial loan application and underwriting phases. When it comes to selling loans, AI enables lenders to automate loan classification and stacking for investors. AI algorithms analyze complex loan documents, extracting and classifying relevant data with unparalleled accuracy. This automation eliminates the need for time-consuming manual audits. As a result, lenders can sell loan packages with confidence and command premium prices.
How to get started with AI in Lending
While many executives have realized the value of AI in Lending to gain a competitive edge, others remain hesitant to adopt the technology. Data security and missing in-house expertise to effectively train and deploy an AI model are common concerns. Here are best practices on how to get started with AI:
- Leveraging Pre-Trained Models: Instead of building their own models, more and more organizations utilize pre-trained AI models, specifically designed for the lending industry, to accelerate implementation and ensure optimal performance.
- Starting Small with Prototypes: Initiating AI adoption with well-defined prototypes or pilot projects allows organizations to build experience, demonstrate value, and gain stakeholder buy-in.
- Harnessing Blockchain Technology: Blockchain’s inherent security features can safeguard sensitive borrower data, mitigating security risks and fostering trust in AI-powered solutions.
AI will continue to transform the way lenders operate by providing an opportunity to accelerate speed, increase accuracy, and demonstrably improve operational efficiency. This is a new source of competitive advantage in a tight market.
ELASTECH’s AI solutions for Lending are proven to increase underwriter efficiency by more than 150%. The applications have been extensively trained with real lending data and 12,000 different loan documents to validate accurate information. This fosters automation and optimizes every step of the lending lifecycle, helping lenders to rapidly process loans, perform QA/QC, reduce risk, cut costs, and improve customer experience. Click below to schedule a conversation with an expert who will help confirm the specific benefits of AI in Lending for your organization.
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