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Technology is now one of the essential elements for the growth and development of many businesses. Artificial Intelligence (AI) is an example of such tech becoming popular with businesses, like online lending.
With technology becoming a big part of people's lives, AI has become the topic of discussions among tech-minded people on whether it is a blessing or a disaster.
Many people have long ignored traditional banking and money-lending due to the rise of online banking and online lending. People are no longer willing to walk inside the bank to talk about the terms of money borrowing. With a few clicks of a button via online lending, you will know the type of lending scheme suited for your credit score and your needs.
Online and mobile banking and lending have become increasingly popular due to the pandemic since people stay at home as much as possible. These have become the tools for transactions, enabling banks and lenders to easily access customer information, such as online and offline transactions and detailed demographics.
The main function of AI in lending is making documents and credit rating systems electronic. This allows banks and other lending facilities to process applications for installment loans and other inquiries quickly. Through AI, lenders will easily know the risk or creditworthiness of a client.
The assessment of risk is vital for any loan application, making it a complicated process. However, AI can simplify analyzing and combining relevant data relating to the client's latest transactions and most recent financial activities. However, critics are still apprehensive about the use of AI in online lending.
Here are the advantages of using AI in online lending:
Since AI can efficiently process complex data, it can easily detect fraud in real-time in a loan application. Online lenders are expected to secure their transactions. Thus, AI will help in fraud detection through a set of rules, any suspicious activity detected by the mobile app, and all big or small financial transactions using the mobile phone.
AI can also play an essential role in securing the identity of the loan applicant. It can prevent any cybercrime from happening by protecting the personal data of the client. The technology can inform the client via smartphone notification of any suspicious activity using their names or accounts.
Since the machine's decisions are based on previous activities and data, there is lesser room for error. This makes AI beneficial for making complex calculations and answering complicated problems since it can be done with no error.
As mentioned, AI hastens the process of knowing the applicant's risk and creditworthiness with just a few clicks of a button. This means that the processing time for loan applications is much faster than when not using any AI.
Also, making use of digital assistants will make inquiries much faster than waiting in line for your inquiry to be catered to. Some business establishments use digital assistants to save them more time and cater to more clients. AI helps the business attain the demands of the users without having them wait for their turn.
It has been established that loan processing is much faster with AI. It speeds up the rejection or approval of the loan application. Furthermore, once the client knows that their application was rejected, the machine will provide other options that may fit their needs and qualifications.
Here are the disadvantages of using AI in online lending:
Using technologically-advanced systems will cost a lot. It is expensive if you combine the cost of installation, repair, and maintenance. Those with more significant funding can implement such a system, but smaller businesses cannot.
There is a possibility that humans cannot work without the help of machines with the rising dependency of humans on technology. We will increasingly be more dependent on machines. This can lead to deterioration of the thinking and other mental abilities of humans.
Since people will resort to their banking or lending mobile apps, there will be lesser employment due to the workforce's replacement. There will be no more people going to physical banks and lending companies to inquire or apply. This will result in unemployment.
AI machines were programmed to work with a particular set of rules and commands. These machines cannot be creative in making solutions for the client's problems since they only rely on algorithms. These machines cannot adapt to any change in the environment.
Artificial Intelligence is the future of online lending. It results in more accuracy in solving problems, more efficient lending transactions, and fewer errors. However, using AI can be costly and can compromise the employment of many people. Although Artificial Intelligence is a helpful system in online lending, there are certain things about the business that still need human intervention.
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