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In a country where a large section of population finds it difficult to get loans from banks, a remarkable change is being ushered led by several fintech companies that are using artificial intelligence (AI) to solve many of the problems associated with traditional loan disbursals. Most experts feel that AI will enable access to credit services in a purely digital manner to a much larger pool of eligible population than today.

Commenting on this gradual shift towards more technical angle, Piyush Khaitan, Founder, NeoGowth, said, that financial institutions have now turned towards a customer-centric approach rather than just a product-centric approach to keep up with the highly competitive market and in this entire process, high-end technology like AI has a substantial role to play by helping financial institutions to underwrite customers who are otherwise excluded from the mainstream credit, who are first time borrowers and have no or insufficient credit history.

But how is AI being leveraged to drive this change? When asked this question, Puneet Agarwal, Co-founder at Money View, a fintech company that uses AI and machine learning to provide loans to people with no or low Cibil score, said that technology helps in assessing credit worthiness above and beyond traditional bureau reports.

“This not only helps improve credit risk assessment but also enables lenders to significantly increase their ability to service a large segment of the population that does not have access to formal lending channels,” he commented.

Adding on to it, Kumar Srinivasan, CEO, MatchMove said, AI-based lending platforms analyze thousands of data points — including traditional and alternative credit bureaus, bank account records, social media streams, and public records — and find patterns that indicate creditworthiness, the propensity to default, and the likelihood of fraud.

“AI can help drive accurate decisions at a lower cost. AI tools can learn and monitor customer’s behavioral patterns to better identify fraud and risk proactively. AI tools can potentially prevent fraud from happening based on the customer’s pattern,” he confirmed.

Many industry observers feel that accuracy and predictability are primary goals of introducing AI into the banking industry by removing human biases and prejudices.

Amit Yadav, Team Lead – Analytics, ePayLater, says the world of finance was always a particularly data-driven space and with adoption of smartphones and a digital way of life by Indians at large, a large amount of data is now available digitally to lenders.

“New age technologies like AI and machine learning ensures fast processing of a wide set of disparate data. This would allow the industry to extend credit to a higher percentage of customers, even the new-to-credit or first-time borrowers who are otherwise left untouched by banks and other financial institutions due to non-availability of financial history,” Yadav further added.

Abhishek Gandhi, Co-founder, RupeeCircle, believes that digital lending platforms have been one of the early adapters of AI and that banking and fintech industries are already experiencing the change it has brought, especially in areas such as customer service, back-end operations management and underwriting.

Till now, availing a loan from banks or NBFCs used to be a tedious task with the borrower having to move from office to office for certifications and approvals, and then wait for at least one week to see the loan amount credited to his account.

“With AI making waves in every sector it steps into, the lenders have discovered the ways to simplify the loan disbursal process, not only for borrowers but also for themselves as well. From allowing the applicants to submit their loan application online without having to call a customer support person for guidance and surpassing the measure to evaluate the creditworthiness of each applicant manually, the process is simplified to an extent,” said Mahesh Shukla, Founder, PayMe India.

He adds that the agile and faster loan processes, improved efficiency and productivity, and the increased bottom line, are the benefits that AI transformation brings on table.

“The old ways of credit underwriting, creditworthiness assessment and loan approval are now replaced and reformed by AI which will wheel the industry growth at a double pace,” Shukla concluded.