When we are considering the change and transformation in the financial sector, the first thing that a person must consider is how fast and efficient the system has become and how it can be used for loan approvals. Behind all these advancements is the role of AI and how it can increase the efficiency of the banking system.
In the lending sector, the role of credit score is huge, and for that it needs more fast and accurate service that can be relied upon. For example, a bank now needs predictive analysis capability to improve the loan disbursement process and can be used to increase the effectiveness of the lending system.
The Role of AI in Credit Scoring Activity
One of the core benefits of AI is that it can accurately judge the spending habits of an individual and, through that, can provide a score that is beneficial for lending partners when they are asking for a loan amount.
The first aspect of a loan DSA partner is to check the current role of the candidate and then decide which lender is suitable for the loan. Now, to check that the DSAs relied on the credit factor and through that one can find the right data points that help a person to analyze in real-time.
The fintech companies in India, like ZestMoney, Upstart, and others companies that are enabling AI tech to increase the accuracy of credit scoring. Using AI to check the digital transactions and factoring in all these activities to increase the likelihood of customer profiles allows a bank to check whether they can make the payment or not.
Thus, it has helped the lenders and the customers both to know about the credit scores and understand what areas need to be improved.
Speeding Up the Loan Approval Process
When a lender is checking the loan approval process, the first thing that one must check is the credibility of the borrower, and that can be done effectively with the features of AI that are improving in the system.
The group of founders who are creating new startups are the ones who are using AI as the tech and are improving the neo-banking service. For example, for an individual who is going for a borrowing them, it’s important to understand the criteria that it takes to find the approval of the loan.
As the banks have started collaborating with the fintech startups, they are now verifying the lender digitally through video KYC. Then they can take up the decision whether to accept or reject the loan amount.
AI Helps to Increase Financial Inclusion
The next important thing that AI can do is the role of financial inclusion, and through that, they can find the right source that will eventually help the banks to serve more customers by penetrating the market.
The recent boom of the microfinance industry is one such example where a person can find the appropriate customer segment with the help of AI technology that is making the loan disbursal process easier.
A bank can target the rural areas and the population of the region by creating loan products like agriculture loans and working capital loans with different terms. All of these will help a person to have better offers and for the bank to include that individual in the customer base.
Better Risk Management System With the Help of AI
The bank also needs the need for better risk management as it might raise the GNPA and NNPA of the lenders. Therefore, the use of AI for risk management and compliance is more than necessary, and that helps to provide the best results that are effective for the lenders.
A borrower can find the best app for DSA, and based on that, they can find the lenders that match the risk profile of the borrower and qualify that individual for providing the loan.
How Finance Can Be Evolved in the Future?
The evolution of finance is dependent on the role of technology. Through that, it can find the best way to provide traditional banking services in a new and efficient way that can be used for the benefit of the customers and borrowers.
These are some of the advantages of AI in the lending industry, and its work in the following domain is making it ever-efficient and turning banking into a continuous process of evolvement.
