Artificial intelligence in lending - by Lindsay Mesh Lotito

Artificial intelligence (AI) is beginning to help transform lending by enhancing decision-making, improving risk management and streamlining operations. With AI-powered tools that analyze vast amounts of data, lenders are able to assess borrower creditworthiness more accurately and efficiently. AI can evaluate a wide range of factors, including financial history, market conditions and even non-traditional data sources like social media activity or payment patterns as opposed to the traditional underwriting models only relying on a limited set of criteria, typically provided by the borrower.

One of the primary benefits of AI in all industries is its ability to automate the time-consuming tasks of data entry and document processing. This automation reduces human error, accelerates the loan application process and enables lenders to provide faster responses to borrowers. Additionally, AI can improve the accuracy of credit risk assessments and allow lenders to make more informed decisions by helping to identify patterns and trends within the data that might not be immediately visible to human analysts.

AI’s predictive capabilities are also valuable for risk management. Lenders already try to mitigate risks by analyzing historical data and current trends, but AI can also forecast potential defaults or financial stress.

Although many benefits, lenders do need to be cautious in implementing AI. With the need for vast access to data, specifically for credit review, there is always a risk of privacy and security issues. The AI system and thus the data input need to be highly secure. Another concern is regulatory compliance for fairness, transparency and accountability. As AI operates as learning algorithms, it may be difficult to understand how it arrived at a decision causing transparency issues, but also not allowing the lender to challenge and rectify a decision made AI.

Overall, AI can assist the commercial lending industry by making processes more efficient and analyzing the data to ultimately benefit both lenders and borrowers.

Lindsay Mesh Lotito is a partner and is a member of the banking & finance and real estate practice with Forchelli Deegan Terrana LLP, Uniondale, N.Y.