How Lenders Should Leverage the Power and Promise of Artificial Intelligence

Technology does not wait for rules or regulations. Artificial intelligence (AI) is no exception. The potential profit associated with fintech speeds up innovation, but it also increases the risk of implementing machine intelligence without assessing potential hazards.

Simply put, we do not understand how some machines solve problems with deep learning algorithms.

This risk can be costly. For instance, problems with technology, which aren’t as complex as deep learning, have startled financial markets. There were six stock market crashes, particularly the “flash crash” of August 24, 2015, due to imperfect market operations. And even though the markets recovered fairly quickly, litigation is still ongoing.

Another risk factor is bias. The promise of programmed computers is pure objectivity, but machine learning shows human tendencies. Combined with the known behavioral problems in humans, AI, without safeguards, can permanently encode the errors of human investment and cognitive impairment.

As with all the major inventions, AI is irresistible due to a combination of social, technological, and economic benefits. And the assault on competitive advantage will likely exceed cautious compliance efforts. This is troubling. What is missing from AI is a framework of clear, sound and open source agencies to determine if (and when) control of an investment process should be transferred to a machine.

So what can we do?

The financial sector has this rare moment to drive the AI revolution in a safe, mutually beneficial direction. We should build a leading consortium in the field of investment professionals, IT and machine intelligence to create a hands-on, evolving and open framework for investment management. These extensive interventions would constitute a central forum to mitigate risks to the financial system and provide valid standards for developers protecting us from the risks of AI.

AI is here to stay. We now have the opportunity to shape the evolution of this remarkable technology and initiate a secure era of AI and machine intelligence investment.

This is true in the automotive industry sub-sector. As lenders, one of the main risks is the borrower’s default. While you and your company may have developed different strategies to mitigate this risk, a number of new products and technologies are making life easier.

One of these new products is from Aclaro. Released in December 2018, Aclaro has a FinTech artificial intelligence system – published reimbursement risk that can accurately predict if a particular borrower will default. Aclaro’s artificial intelligence systems can help increase profits, manage risk, and avoid unnecessary headaches down the road.

Aclaro is a leader in helping the banking industry adapt to these trends. As just one example, Ben Stefanovski, the president of Tracir Financial Services, has relied on Aclaro to help manage his portfolio.

“Aclaro has given us a clearer and deeper understanding of the risks associated with our loan portfolio,” he said. “Aclaro’s repayment risk system allows us to check the repayment risk daily. We now have the accuracy needed to make decisions based on current facts and to identify risks more quickly. Looking at risks like 90% downtime and over 90% confidence level every day, this is a crucial change for us and the industry.”

Today’s top companies remain profitable. They have found new and innovative ways to optimize their most valuable asset: data.

Aclaro Risk Management can help with this effort. It uses machine learning algorithms to analyze the credit portfolio of a lender. The risk management system optimizes AI and big data to calculate a risk score for each borrower in the portfolio. Key components include a beautiful, fully web-based business intelligence front-end solution. The software is based on a combination of over 100 individual variables related to credit terms, insurance coverage, employment, and vehicle data. However, Aclaro never uses personal information like name, income, social security numbers or credit scores.

By leveraging Aclaro, companies can maximize their gold mine of customer data to make smarter decisions. It helps lenders, in particular, determine which borrowers are affected by a lack of accessibility to lending data and can help lenders mitigate their risk.

“With the introduction of this new risk management solution, Aclaro is disrupting the status quo of the market by providing lenders with the high-level technological tools they need to compete in today’s modern market,” said Farshad Fatouhi Ph.D., CTO of Aclaro.

To learn more about Aclaro click here.