Over the past 20 months, there’s been a noticeable decline in lending verification document quality, disproportionately affecting senior citizens and African Americans.
Senior citizens are 1.4 times more likely to upload poor-quality documents and African Americans are 1.1 times more likely, according to Informed’s Data Consortium. This statistical variation suggests a potential correlation warranting further investigation.
- Access to digital technology: One possible correlation is the varying access to digital technology among different demographics. Seniors and African Americans may face greater challenges in accessing and using digital platforms for document uploads and financial transactions.
- Digital technology maturity: Another factor to consider is the level of digital technology maturity within these groups. It is possible that seniors, African Americans and lower-income borrowers are less familiar with the technology required for document uploads. This technology adoption curve leads to lower document quality and could have a correlation to access to digital technology as described by the Pew Research Center.
- Difficulty providing income validation documents: The auto finance industry often requires income validation documents during the application process. Seniors and African Americans may face additional challenges in providing these documents, potentially resulting in lower-quality uploads. Seniors, for example, may get income from retirement benefits or pensions as opposed to traditional paystubs.
AI can decrease potential for disparate impact
Document verification and quality enhancement: To address the issue of declining document quality, AI-powered document verification tools assess document upload quality. These tools can detect blurriness, missing information and other issues. If there are issues, the tool prompts users to resubmit documents, ensuring smoother and more accurate loan application processing.
Language processing for accessibility: AI-powered natural language processing (NLP) helps individuals with varying levels of digital literacy complete loan applications. NLP-driven chatbots and virtual assistants guide applicants through the application process, simplifying complex language and ensuring they understand each step.
Automated decision-making: AI-driven underwriting systems streamline the loan approval process by automating credit assessments and decisions. Automated decisioning reduces the time it takes to process applications, eliminates the barrier of document upload and provides faster approvals to eligible customers.
The decline in document quality among seniors and African Americans poses challenges for the industry. Investigating potential correlations, such as limited access to digital technology and difficulty in providing income validation documents, is crucial to addressing disparities and ensuring that auto financing remains inclusive.
Auto lenders, policymakers and technologists must work together to bridge these gaps and create a more equitable auto finance landscape.
Incorporating document AI into auto finance will not only improve efficiency but also foster inclusivity by addressing disparities in document quality and digital access. To maximize the benefits of AI, collaboration between financial institutions, technology providers and policymakers is essential to ensure that AI-driven solutions are designed with fairness, transparency and ethics in mind.