Lending digital transformation powered by AI and Automation. How does it work?
Since the digital revolution, banks and lending organizations have been adopting various technologies to provide services online. Largely, this change was motivated by internal processes improvement and rising expectations of tech-savvy customers. Payments, transactions, registrations, documentation management, loans, and other banking services became available right on your device.
However, financial apps and systems are complex. They require a high-security level, precision, and seamless performance to ensure the top service quality. Because of this, the drive for best-in-class technologies is going strong and led banks directly to AI solutions.
Artificial Intelligence opened the possibility to offer online even the most sophisticated services, like lending. Without the technology, banks couldn’t digitize all the steps of the lending process while eliminating the security risks. The Economist called AI a game-changer in the FinTech industry and found out the technology permeates multiple lending processes. Respondents of the survey use AI to support IT departments, scoring, fraud detection, and other core activities you can see in the graph below.
In this article, you’ll learn about:
- How lenders use AI today;
- AI adoption trends
- How AI automates lending processes and its benefits
- The tools to create AI-powered apps faster and on a moderate budget.
The current state of AI in landing
Banks have already been using AI for several years by now. Although the technology isn’t easy to introduce into the legacy systems, lenders strived to adjust to it at all costs.
AI technology became a hot topic among banks owing to its ability to automate, facilitate, and enhance lending processes. The technology is capable of repetitive task automation (in combination with RPA), predictive analytics, advanced risk assessment, and neural language processing.
AI serves as an employee assistant, making suggestions to the team members to make their work easier. In this way credit consultants and decision-makers can focus on more vital tasks while the system handles most of the document processing and other repetitive actions.
How AI automates lending processes and its benefits
Faster application processing
Loan application processing requires much documentation and borrower data processing. In the past, it took weeks for a bank to make a loan decision. With AI, lending systems are able to process loan applications automatically. First of all, AI-enabled lending applications allocate the application to the corresponding department and assign it to a suitable specialist. AI fills in the fields in the documents with appropriate data, eliminating a great deal of manual typing. It allows the system to derive borrowers’ data from internal and external sources to use it for automated decision-making. When the decision is ready and approved by an employee, the system can then initiate transactions.
Improved borrower scoring
As a part of the loan decision-making process, AI can score borrowers based on a set of rules. All the bank’s employees need to do is define the scoring rules in the system. The rest of the scoring actions like borrower data analytics, calculation, and decision presentation are handled by AI. In the case of borrower scoring, AI works with business rules management systems (BRMSs).
It has greater data processing capacity than bank workers in terms of speed. It finds valuable scoring points in larger volumes of information in minutes (depending on the AI system) and can request additional data automatically. Therefore, AI and a powerful scoring engine do the work of a whole department with more precision in less time.
Owing to the level of automation and the capacity to execute processes at the same time, AI eliminates the cost of lending processes. As the AI does much work itself, a lending organization won’t need to pay salaries to specialists, as before. It allows banks to reduce budgets for loan processing, customer care, and management.
Internal data management
AI makes internal data management and inter-department communication much faster and easier. Primarily, it distributes the loan-related data and customer profiles in the corresponding data sets. In doing so, AI can analyze the data to make valuable insight into department productivity, expected revenues, and customer demographics.
Service personalization and customer support
By analyzing customers’ profiles and their service interaction history, AI can define their needs. AI-enabled lending applications can suggest the most effective customer care strategies, based on their demographics, levels of income, social status, and other factors. Additionally, it offers the customers suitable loan conditions that are beneficial both for the lender and the borrower.
In terms of customer support, AI can serve as an automated consultant, answering customer questions or directing them to a particular specialist that can help them. Neural language processing, performed by AI, facilitates the client request processing and easily finds the necessary info in the client portals.
AI adoption trends in lending automation
Lenders are still exploring the power of AI and how they can use it to increase their service profitability and customer satisfaction. Here are some trendy AI use directions.
AI has revolutionized the bank’s underwriting and risk management processes. Artificial Intelligence can access up to a hundred data points to check the borrower and make precise estimations for a loan amount, payment time, and margins. Additionally, the technology analyzes the customers’ digital data more effectively than humans, which makes loan conditions safer both for banks and borrowers.
Large banks investigate AI/ML capabilities to comply with the numerous regulations. AI allows enterprise-level lenders to consider the regulations by means of automated compliance checks. The technology executes regulation checks without errors and doesn’t miss any of the valuable points. Due to the power of AI, banks are now striving to automate as many regulatory processes as possible.
Loan processing capabilities
Lending service providers aim to increase loan application volumes they can process in a shorter time. The volume of loan applications processed depends on the loan application processing cycle time. Automated loan processing combined with AI can handle almost every step of the loan granting cycle, making it several times faster.
AI + low-code = more benefits
AI is a sophisticated technology that requires large budgets and a professional development team. Often, to use AI, banks need to modernize their whole system. However, there are cheaper and faster ways to develop AI-powered solutions. One of the most cost-effective and fastest ways to make AI work without full-scale banking system modernization is low-code development.
You may ask: what has AI got to do with low code? The thing is that when you combine a robust software development tool with AI, you get the AI-powered lending application much faster. Low-code’s visual development approach allows developers to build apps from the ready-made code components. Here’s what the low-code development environment looks like.
At the same time, professional developers can write code for custom features to manage the application with business strategy. Low-code platforms make it possible to integrate the lending application into data endpoints in minutes. Because of this, low-code apps give AI enough data to make an in-depth borrower evaluation.
Low-code development is also accessible for citizen developers and domain workers which can reduce system maintenance costs when the application is ready. For instance, the sales department can change the parameters of customer scoring without turning to the IT department.
ProcessMIX for AI-powered lending software development
Powerful low-code platforms, like ProcessMIX, integrate AI technology to enable users to create AI-powered lending automation solutions. The platform specializes in banking software development and is an embedded scoring engine, business rules management systems, and AI/ML capabilities.
You can start creating your lending automation app right now with a free ProcessMIX Demo. The ProcessMIX team is ready to help you at any stage of your software development.