Artificial intelligence may be coming soon to a loan near you.
A growing number of lenders are using artificial intelligence as a tool to analyze more data, including bank account balances and utility payments, to help determine creditworthiness.
Lenders, including a financial services company and a subprime auto lender, have partnered with ZestFinance, an artificial-intelligence company founded by Google’s former chief information officer, to help boost business and reduce losses.
Discover Financial Services will use ZestFinance’s automated machine learning tools in an effort to improve lending decisions and cut default rates, according to a Wall Street Journal report.
Meanwhile, Prestige Financial Services, which specializes in loans for subprime borrowers, has turned to ZestFinance for help with auto loans.
These partnerships mark another step that artificial intelligence has taken into the lending space, and signal its emergence in the industry.
Want to know more?
- Why does the lending industry want to use AI?
- What could this mean for you if you’re looking for a loan?
Why does the lending industry want to use AI?
The lending industry has been integrating artificial-intelligence technology into the mix over the past few years. Lenders now using AI include Synchrony Financial and Ford Motor Services Co.
Access to new consumer data points — including purchasing history, bank data, utility information and social media habits — has led lenders to seek ways to improve the accuracy of their decisions.
In the past, lenders generally used consumers’ credit reports before deciding whether to approve a loan. Now the industry has moved toward considering more variables, which artificial intelligence allows them to do.
“Banks that fail to invest in machine learning will end up fundamentally uncompetitive in a couple of years,” said Discover CEO Roger Hochschild when announcing the company’s work with ZestFinance this month.
What could this mean for you if you’re looking for a loan?
As use of artificial intelligence becomes more popular in the lending industry, the greater the odds that AI could play a role in your future lender’s decision.
Discover says it will start integrating ZestFinance’s artificial-intelligence tools into its loan process later this year, following a trial of the technology. Prestige started using ZestFinance’s technology last year.