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  • Writer's pictureHaseeb Qureshi, Chief Operating Officer - Conister Bank

Harnessing AI To Revolutionise Alternative Lending

Using artificial intelligence (AI) in our everyday lives, and in business, is firmly in the mainstream and it’s now commonly accepted that any organisation that doesn’t ultimately integrate AI into its services and offering is going to fall behind.

Research from Manx Financial Group asked brokers about advancements in AI, and how it will affect small and medium-sized enterprises (SMEs) over the next twelve months. 40% said it would be used to further facilitate commercial finance application decisions, while a fifth (20%) of SME brokers thought it would be used to identify new business opportunities. 19% thought SMEs would use it to determine future business risk and one in ten (9%) believe it will replace back office and non-client facing roles.

But how does an industry like alternative lending for SMEs – which requires sometimes emotive decision-making that requires a human thought process – adopt unemotive artificial intelligence?

Enhancing Customer Service

AI algorithms can be deployed to very quickly analyse vast amounts of data, including financial records, business performance, and wider industry trends. All this data is then used to provide the basis of highly personalised loan recommendations to founders, which ultimately increases the chances of loan approval and – in a world where personalisation is expected from customers – higher client satisfaction.

Streamlined Application Processes

Traditional loan application processes can be arduous, time-consuming and complex, leading to frustration for SME owners whose time is better spent on running their business. AI-powered alternative lending platforms can simplify and expedite the application process through automation. Chatbots and virtual assistants can guide applicants through the necessary steps, collect required information, and provide real-time support – saving on both time and paperwork.

24/7 Accessibility

AI has made chatbots increasingly intelligent and almost unrecognisable from the 'computer says no' chatbots of old. This allows customers to speak to their lenders 24/7, and while a chatbot still won’t replace an actual human being to speak to, it does mean that basic queries can be answered, and waiting times reduced.

There are also financial and security benefits to utilising AI – particularly when it comes to fraud and risk assessment of complex structures.

Real-time Fraud Detection

AI's ability to process and analyse data in real-time significantly strengthens fraud detection capabilities. By monitoring ongoing transactions and evaluating patterns, AI algorithms can swiftly identify suspicious activities and potential fraud attempts – for example, is the customer suddenly checking their account multiple time a day, or at strange times? This proactive approach allows lenders to mitigate risks promptly, protecting both parties’ financial losses.

AI can also enable secure authentication mechanisms such as facial recognition or voice biometrics, adding an additional layer of security.

Advanced Risk Assessment

As already mentioned, AI excels in analysing large volumes of data and identifying patterns that human analysts may overlook, and by leveraging machine learning algorithms alternative lending platforms can assess the creditworthiness of SMEs incredibly accurately. AI algorithms can analyse and take data points from credit histories, transaction records, social media activity, and other relevant data points to generate comprehensive risk profiles.

That said, this is the area where that human interaction is still needed – many lenders will ensure that a person takes a second opinion on more complicated applications – for example when historic financial or credit data also needs to be considered.

AI is the future, and its advent has brought significant advancements in alternative lending at a much-needed time for SMEs, allowing them to faster overcome financing challenges and fuel their growth.

AI, used correctly, will also give alternative lenders the advantage over traditional lenders, who can struggle to keep up with the rapidly changing digital world. It will also streamline resource within our organisations, allowing us all to spend our energy and personnel hours on tasks where human touch really is irreplaceable.

While there are common misconceptions that AI 'will take our jobs' it is our feeling that it is is used properly, it is a tool that will just make us better at them.


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