Change is a popular theme, from Sheryl Crow, David Bowie to philosophers, activists and dreamers, as change presents opportunities to make things better. And in lending, there is no denying that there is much to be desired from traditional, national score underwriting methodologies–from a lack of efficiency to inherent bias’. Do you know anyone who would be excited to start the process of a loan application?
What
if changing your underwriting process and scoring method is not only
possible, but fast, easy, and delivers proven results? Zest AI’s mission
is to make fair and transparent credit available to everyone. That is
why we partner with credit unions in this shared mission to better serve
members while improving the credit union’s efficiency by increasing
automation.
Let’s take a closer look at the process. Credit applications fall into one of three buckets:
For
example, maybe you auto-approve any applicants with an industry score
over 750 and auto-decline any applicant with a score under 600. The
problem here is that the vast majority of credit applications you
receive invariably fall in that gray area.
The purpose of the
traditional scoring system is to allow you to compare apples to apples
when it comes to credit decisioning – except that apples come in all
different shapes, sizes, flavors, and levels of ripeness. In other
words, two applicants with the same industry scores don’t necessarily
represent the same level of risk. Unfortunately, these scores are based
on so few data points, your decisioning system can’t tell one apple from
another.
What if we could shrink the number of applications
that require manual review without increasing risk and, in fact, find
more deserving borrowers that would have been denied due to the old
score’s inherent bias? In short, what if we could make the change to
spend less time on manual review safely, increase efficiency and member
delight?
The good news is that with Zest AI’s automated
underwriting technology, this change is within reach for all credit
unions. Underwriting with Zest AI is better because we instantly
evaluate hundreds of data points instead of the handful that comprise a
national score. The model and scoring is completely transparent and
ensures compliance. It’s faster because we apply cutting-edge data
science, resulting in more accurate approvals, and with a majority of
applications able to be auto-decisioned. And it can strengthen your
member relationships and delight them with fintech decisioning speeds
along with better identifying and serving the historically underserved.
It’s
easy to see what this means to your borrowers. More instant yesses is
never a bad thing as far as they’re concerned. And it’s easy to see what
this change means to your lending staff, too. More auto-decisioned
applications means fewer manual applications for your employees to
trudge through, leading to lack of decisoning consistency and less time
spent building relationships.
But what about your operating
expenses? Here’s a little exercise for you: Based solely on labor costs,
figure out how much money you spend to manually process a credit
application. Now calculate the delta between how many applications you
auto-approve now and how many more a bump to 80% of all approvals would
represent. Multiply that number by the per-manually processed
application cost and you’ll have a conservative estimate of how much
money AI-based lending can save you.
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