The role of AI, machine learning and blockchain is gathering real momentum in the business world. Entrepreneurs and investment banks are raising and investing huge sums to discover ways to revolutionise consumer and business finance. Below, we explain what to expect from finance companies in the future.
When you apply for a loan today, mortgage or credit card potential lenders will typically run searches on your credit history to determine your eligibility. Of course, the better your credit score, the more likely you are to be approved and then your loan is subject to further affordability checks and underwriting.
Underwriting involves an analysis of your initial application and your personal details such as; age, employment status, monthly income, whether you are a homeowner or a tenant and whether you receive any benefits.
While this continues to be quite a manual process, the role of technology such as AI and machine learning will soon learn the characteristics of good customers and be able to adjust their scoring accordingly.
In addition, we are likely to be able to extract more information, with less information that consumers provide. The average application form online should start to get smaller and fewer details will be needed to obtain even more information about the customer. Even factors such as their IP address, what device they are using and speed of filling in details – will all become factors to determine eligibility.
Research conducted by the Royal Bank of Scotland claims that blockchain technologies are being used to support a new banking industry clearing system which is very similar to the UK’s existing “Faster Payment” schemes.
Blockchain was originally developed for the digital currency “bitcoin”, but it has now found purpose within mainstream banking. The blockchain is a digital ledger of economic transactions and can be programmed to record virtually everything of value, and not just financial transactions.
In short, the blockchain practically cuts out the middle-man involved in transactions, consequently speeding up the process. his means you can forget waiting a whole day or a few hours for an online loan to come through, you can start thinking about a mere five minutes or instant payment.
Better choice of products
Advances in technology should see a range of new products and alternatives brought to market. Already we are seeing the disappearance of payday loans and growth of online overdraft facilities. The process of taking out loans and then withdrawing money from your bank account is quite passé, instead the use of online payments, apps and topping up credit through your mobile device is becoming the norm.
The finance industry should also find better ways of scoring customers with adverse credit histories and offering products that are more suitable, plus giving customers the opportunity to improve their credit ratings too and more effectively (Source: Payday Bad Credit). There are already sites that are trying to score customer data more effectively and try match them up with lenders including the likes of ClearScore and Noddle.
Lenders may also show better ways to offer flexible payments to customers, by assessing repayment terms and affordability more effectively. This should lead to better consumer choice, more flexibility for customers and better repayment rates for lenders.