Lenders are constantly on the move looking to improve default rates, application processing, and lower costs. We're going to look at a few lending trends that are helping lenders to meet those goals.
AI is improving profitability and efficiency — Artificial intelligence has infiltrated lending just as much as credit card processing. Credit card processors widely use AI to monitor fraudulent activity in real time. It is also used to gauge the ability of a potential customer to make payments.
Lending firms are using AI in the same manner. AI is used to analyze the solvency of potential customers and make decisions about the amount to loan.
Application automation — Many lending companies can pull in customer information early in the application process. This saves customers time and helps avoid potential input errors. Because of these automations, many applications don't require a customer service representative's assistance.
Cloud Platform — The cloud is becoming the de facto standard platform for financial software. In a January 2021 study, Accenture found that 90% of banks use cloud services. It makes sense that so many financial institutions are turning to the cloud. Costs are often significantly less than purchasing and maintaining in-house software. Cloud services also offer cost-effective tech support, often including ongoing updates.
Chatbots — Chatbots have removed the human element in the early stages of customer support. In some cases, a live person is not required at all. Chatbots help gather initial customer information and pass it on to a live person when the situation requires human intervention.
Chatbots have improved from their early days when they were more of an annoyance than a help. With better voice recognition and responses, customers can talk in plain English to these bots and get useful responses.
Looking beyond FICO — The FICO score alone isn't enough for many lenders. In addition to a credit score, lenders source financial information on customers from various data providers to build a more complete financial picture. Additionally, FICO is continually changing its score mythology and releasing updates. Its latest is UltraFICO, which benefits those with a low or no FICO score.
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