The Digital Shift: How Technology is Reshaping Consumer Lending

Technology has touched every aspect of our everyday lives from the way we work, to the way we communicate, to the way we shop, and beyond, so it’s no surprise that it’s also increasingly impacting the way consumers manage their money. An American Bankers Association survey found that 71% of consumers prefer to manage their bank accounts digitally, and a survey done by Chase found that the majority of bank app users would prefer to use one app for all their money needs, like credit monitoring, budgeting, saving, and more. 

It’s all proof that online banking is merely the tip of the iceberg, the modern bare minimum for financial institutions. While most organizations have embraced some aspect of digital banking, consumers are expecting their most trusted financial institutions to take things to the next level and leverage technology across their other services. Otherwise, they’ll move on to tech-first competitors offering better, more robust experiences. 

Leveraging technology for better lending

One area that is ripe for reimagining is consumer lending, and there has never been a more urgent time for change to happen than right now. Relentless inflation has forced consumers to turn to credit as a lifeline, and consumer debt levels are currently at an all-time high. That makes financial institutions’ mission clear: get those all-important funds to their customers quickly and easily, while delivering positive experiences along the way. 

But as the economic squeeze tightens, some borrowers are struggling to keep up with their loan payments, leading financial institutions to become more cautious about issuing credit. It’s a fine line to walk: how do you meet increasing demand for credit and boost your customer base without exposing your organization to unnecessary risk?

It all comes back to technology. AI can facilitate your mission in three major ways: 

• Faster origination: Processing loan and credit applications is an inherently lengthy, manual task that requires a thoroughness that is difficult to accelerate without cutting corners. Well, that’s the case for humans at least. AI can assist in processing information faster and in more depth than we ever could. Leveraging this technology for consumer lending contributes to quicker origination.

• Lower risk: Quicker processes often come at the expense of increased risk, but it doesn’t need to be that way. Because of its ability to simultaneously process data from multiple sources, AI can conduct quicker risk assessments using a full scope of information about the applicant’s credit history, existing accounts, and more to facilitate well-rounded decision making.

• Better experiences: When processes run smoother and decisions are delivered faster, customers have a far more positive impression on the overall experience. iIn a competitive market where customers are spoilt for choice among not only traditional financial institutions but also newer, more tech-savvy fintech options, these experiences go a long way toward creating lasting loyalty. 

But is AI too good to be true?

While AI adoption is surging in other industries, the financial sector is introducing new technology slower than most. Some fear the technology will soon be too heavily regulated, while others fear that the current lack of regulation makes the technology too risky to use. 

Both sides present fair points. Regulation is coming, but is not widespread yet and likely won’t be for a while. However, it is likely that once that day comes, AI will be regulated just like every other groundbreaking technology that came before it to be safe for use, but not so restricted it becomes unusable altogether. But what about the risk in the meantime?

AI fears are especially heightened in the financial sector, where sensitive customer data is used to make critical decisions that have major impacts on individuals’ lives. If bias, data misuse, and poor algorithmic training creep in, financial institutions may end up mistakenly granting credit to untrustworthy customers or denying it to qualified customers who need it. It’s important to understand that this technology is not inherently bad or biased; it's how we use and supervise it that matters most. 

The key is to use a trustworthy, well-trained, and reliable AI tool such as Amount’s platform. We have access to a wealth of data assets with well-defined target variables for credit performance and fraud, and are always working on ways to make our decisioning platform even smarter and more well-rounded. We offer a set of models developed, monitored, and maintained to address critical risk problems and can build custom models tailored to a particular customer's use case. For credit lending, we everage OCR technology to parse bank statements and extract cash flow attributes to enhance our ability to assess creditworthiness accurately. This data is then incorporated into our underwriting model, enabling us to make informed credit decisions based on real-world insight, not biased guesswork. 

But will customers even want this? The general consensus seems to be that there is a hunger for this technology and the positive impacts it can deliver. According to a recent KPMG consumer survey, 51% of U.S. consumers are “extremely or very” excited about GenAI, and 70% believe the benefits of GenAI outweigh the risks associated with the technology. While it’s true that some customers may push back against AI use, financial institutions can adopt it with the confidence that most consumers will be open-minded and will likely come to expect it in the near future.