AI could fundamentally change the future of bank lending — and make it a lot less risky. As AI infiltrates every corner of the business world, banks have been experimenting with the technology for loan underwriting. That experimentation has caught the attention of academics. Harvard researchers conducted a case study on a California-based startup, Zest AI, which uses a machine learning model to assess credit risk for banks as an alternative to traditional measures (i.e. credit scores). Zest is used by more than 180 banks and credit unions, from big institutions like Freddie Mac to small, local ones across the U.S.
AI has the potential to bring about significant changes in the future of bank lending in developing countries by expanded access to credit, faster loan processing, risk mitigation, customized lending solutions, fraud detection and prevention, mobile banking and digital lending.
Collaboration between financial institutions, governments, and technology providers is crucial to ensure that the benefits of AI in lending are realized in a responsible and inclusive manner.
Source: QUARTZ
