AI in Lending: 8 Principles for Successful Digitalization

Jul 05, 2021

Banking | 4 min READ

Build vs. Buy Debate – How to Decide?

Whether for in-house solution development or outsourcing for innovation, both have their fair share of pros and cons. Choosing one over the other won't be a wiser thing to do. Considering external parameters, a balance of both could be a part of developing the AI solutions banks and lending firms would require at that specific point in time.

Sanjay H. Chaswall

Banking & Capital Markets Growth Leader

Birlasoft

Lucas Bianchi

Co-Founder & Director

Namaste Credit

Timelines

While your internal tech team could be busy looking after the existing operations, external third-party vendors could pull off the innovations promptly.

Outcomes

If you are picking your vendor right, explaining the desired outcomes would be a cakewalk helping banks and lending firms to integrate solutions seamlessly into the process and offer post output support for its efficient operations.

Growth impact

You can save time on building a framework from scratch and utilize it to develop your framework. Buying assists you in scaling up your operations.

Strategic intent

Cost and resource-efficient, when you buy solutions from a third-party vendor, you save on time and money.

Skillset availability

You no longer have to empty your pockets in training your workforce. Buying from an expert group who lives and breathes the technology you intend to integrate seems more viable.

The Build vs. Buy Crossroad - How to Decide?

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Lending Transformation – The result

Operating models – pay per use vs. traditional models

The marketplace today is shifting its gears towards the pay-per-use concept. Whether you are a vendor looking to offer agile lending solutions or customers seeking to match payments with your usage, New Future is looking brighter for innovative financing solutions that meet today's business's needs.

Loan volume management

Customers are looking for solutions at breakneck speed. If not you, then there are thousands of other options waiting to take your place. When demand volume is higher, technology helps in faster loan management – from processing, approval to disbursal to stay ahead in the curve.

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Higher underwriting efficiency

The slow and inefficient underwriting process is a significant propeller to adopt AI-based technology faster. If banks and lending firms address complex credit risk, AI and automation quickly bring the solution to the table.

What Does Success Look Like in Lending Transformation

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System and API consolidation

Banks and lending firms are looking to evolve, and what better than agile APIs to lead the way. APIfication will metamorphose banks continuously, improving the processes and outcomes.

One underwriting platform for all needs

AI consolidates the entire lending system and ensures the delivery of an omnichannel experience. It mines and consolidates data to understand customer profiling, turns them to specific touchpoints for communication enabling personalized interactions with customers.

Eight Key Takeaways – How to Build Your Digital Lending Strategy?

Business sponsorship is critical

AI and automation are at their inception. Banks and lending firms are still wary of investing and adopting it to transform every process operation. Hence, these traditional institutions often find it difficult to rely on new-age technology.

Clear investment – outcome alignment

However, change is the only way to stay relevant in this ever so uncertain world today. Thus, it is advisable to apportion a specific investment and draft a phase-wise strategic plan to invest wisely, aligning it to business goals.

8 Principles Crucial to Successful Digitalization

Focus on quick small wins to begin with as you scale-up

Instead of going all out at once, take baby steps to scale up operations slowly. Focus on the priority areas and deploy AI lending solutions in a phase-wise manner.

Small wins arrive real quick in the lending transformation

With small gains, the industry would be able to move faster towards progress and embrace quicker adoption.

Core Principles for Successful Digital-led Lending Transformation

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Fintech platforms adoption by bank lenders

The rise of fintech platforms opens newer avenues for banks and lending firms. Already equipped with the latest technology, banks today deploy solutions through these fintech firms.

Change vs. Chase philosophy

There's more value in change than chase. Consider a cost-benefit analysis; change is the only constant even if you are chasing the market demand. To meet the rising demand, banks and lending firms have to evolve, give up traditional methods, and make way for the new.

Ability to execute the vision and drive the outcomes

Therefore, AI transformed businesses have the vision the evaluate business goals and drive the business through process automation to achieve these goals.

Lending transformation critical to consumers business, cost optimization, bottom line, efficiency

Though the lending transformation is critical to business as it demands disruptive innovation, the bottom line is cost efficiency, profitability, and faster scalability of operations brought through thoughtful integrations. Let's together look up to a business process optimized future!

This is the third in a series of six posts on the digital-led lending transformation - credit risk management, underwriting, and the massive opportunities for banks and financial institutions.

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