Redefining Consumer Lending with AI 

In today’s evolving landscape, the dynamic relation between lender and borrower is being reshaped. The latest drivers of digital banking – artificial intelligence (AI), machine learning (ML), and generative AI (GenAI) – have steered the banking sector to reimagine how it operates and serves its customers.  

A McKinsey Global Institute report predicted that GenAI could add $200 billion and $340 billion in value through greater productivity. AI-powered consumer lending software provides lenders with deeper insights to understand consumers’ borrowing behavior, offer tailored products, and mitigate risks.  

How AI is Transforming Consumer Lending 

1. Refined Credit Risk Scoring 

An AI-based consumer lending platform leverages advanced data analytics and algorithms to deliver precise credit assessments and risk scoring. AI examines metrics such as data usage, payment history, and lifestyle conditions to gain a better understanding of the borrower’s financial habits, identify hidden patterns, and enable a more thorough credit assessment and refined credit scoring.  

2. Personalized Loan Offerings  

AI creates personalized loan offerings by analyzing borrower’s profiles, including their risk exposure, spending behavior, and preferences. It also customizes loan terms and interest rates as per individual requirements.  

3. Automated Loan Application Processing  

AI automates various aspects of loan processing, streamlining data entry, document verification, and eligibility checks. AI-powered consumer lending solutions extract relevant data from loan applications, verify documents, and render reports based on evaluated data. 

4. Better Risk Assessment 

With modern consumer lending software, banks can gain a comprehensive view of a borrower’s creditworthiness. The AI algorithms analyze vast data sets such as purchase history and utility bills for better risk management and accurate lending decisions.   

 5. Faster Loan Disbursement 

A modern consumer lending solution can automatically extract information from multiple documents, apply predefined criteria to assess loan applications, and continuously learn from loan outcomes. This automation reduces procedural delays and accelerates disbursements.   

6. Seamless Lending Customer Service 

AI can share real-time updates of loan application to customers, escalate complex issues, and proactively suggest solutions. AI-driven chatbots offer personalized responses to customer queries, enhancing experience.  

7. Improved Collections Management 

Consumer lending systems, powered by GenAI, can support banks in identifying potential default and at-risk accounts through transaction analysis. They enable lenders to take proactive measures and create effective loan collection strategies.  

Implementation of AI-first Consumer Lending Platform 

An Indian co-operative bank with over 100 years of legacy adopted Newgen’s Lending Solution for end-to-end automation of its lending process. The bank sought a solution to address challenges like a paper-based lending system, limited loan processing options, and lack of automated risk profiling. The digital transformation of the bank accelerated loan processing from a few days to 8 hours and expanded the loan portfolio.  

To Sum Up  

From improving accuracy in assessing risk assessment, delivering personalized financial products, and improving operational efficiency, a robust consumer lending solution paves the way for higher efficiency and positive lending practices. A scalable solution can boost the growth prospects for banks, helping them adapt to changing consumer needs.