The AI Book

CHAPTER 13Applications of AI in Deposits and Lending

By Pouya Jamshidiat¹

¹Leader in Product Management, Pioneer Minds

Artificial intelligence (AI) works best in the company of humans, and not on its own. The key power of AI is to provide people with insights and knowledge so that they can make more informed decisions about their finances and then act accordingly. The business of lending works primarily based on one key piece of information: the credit scoring. This is a key measure that shows a person or organization’s ability to repay a loan, which is crucial for lenders in order to price and grant any financial product. The priority for lenders is to avoid or minimize the risk of borrowers defaulting, which is assessed by analysing their repayment histories. And this implies that borrowers need to have an existing credit history. But in the absence of any credit history, such as for students or new businesses, how can lenders judge their creditworthiness? Should they just miss out on this customer segment?

Not any more.

Alternative Data

The utilization of alternative data is playing an increasingly key role in deposits and lending. Alternative data refers to any additional data points or real-time information that can be collected in order to help lenders build a realistic and more granular picture of a borrower’s profile. Alternative data can encompass:

• Digital footprint, which refers to customers’ online presence (including mobile data).
• Financial transactions and patterns. ...