22 Jun Insight on the Rise of Credit Robos in the lending market
Finextra in association with Advice Robo recently surveyed 106 senior management people from business and IT groups within 54 financial groups in 26 countries to study lenders’ efforts to prepare their business for changes in the credit market. The study particularly evaluated the potential of artificial intelligence and machine learning in credit risk management. 50% of the respondents were from UK, while the remainder spread worldwide.
This study by Finextra and Advice Robo is the first study into the application of advice robos for the lending market. Robo advisors can be used to advise or automate parts of lending process such as credit scoring and ongoing risk evaluation. 50% of the respondents agreed to the fact that advice robos can be a major help in defining credit risk more effectively and if we consider the respondents from UK, this proportion rose to 65%. There are some hurdles in adoption of robos for credit scoring such as quality of data, greater trust in people and experience rather than algorithms and artificial intelligence.
Key Findings of the study include:
- 83 % of the respondents agreed or strongly agreed that the economy cannot prosper without a supply of credit to consumers and SMEs.
- 79% of the respondents agreed to the fact that a lender should play a role in protecting customers against overconsumption of credit.
- 75% agreed or strongly agreed that unstructured data can improve the quality of risk profiles as a supplementary measure, especially for prospective customers that have a thin credit file.
- 75% of the respondents agreed that they can be benefitted from combining structured and unstructured data to build good risk profiles
- 55% of the respondents agreed and highlighted the fact that customers just want quick money and don’t care about terms and conditions.
- 46% agreed to the fact that clients/customer prefer personal approach when it comes to borrowing rather than a digital one. Only 28% were in disagreement to the mentioned fact.
The results of the survey showed that there is an increasing awareness of the potential for unstructured data to supplement credit risk scoring and ongoing risk modelling in consumer and SME lending. The lenders although felt that there is lack of expertise in artificial intelligence within the lending industry, but going forward this is likely to change.
Diederick Van Thiel, CEO of AdviceRobo believed that the use of new technologies creates great opportunities for lenders and underserved people. He invited lenders to be brave and start using this new technology to experience the huge benefits instead of being constrained by hurdles.
Full Report can be downloaded from here!
