What the Rapid Growth of AI Means For Credit Union Lending

Originally published on CUInsight.com

For credit unions, it’s no secret that technology is transforming our industry. We all know how important the digital experience is for serving our members, attracting new members, and staying competitive with banks and other financial services competitors. Simply put, technology helps us serve people better – and artificial intelligence (AI) is poised to revolutionize how we do that.

With ongoing advancements in machine learning algorithms, natural language processing, and computer vision, AI systems are becoming increasingly capable of handling complex tasks, understanding nuanced human interactions, and making autonomous decisions. This rapid progress is expected to unlock new possibilities for credit unions in many different ways – and it’s exciting to see that CUSOs who support the credit union industry are already finding ways to make advanced AI accessible to credit unions of all sizes.

AI Will Help Streamline Underwriting – While Ensuring More Equitable Access              

The loan origination process, traditionally known for its time-consuming and labor-intensive nature, will be one of the areas that most greatly benefit from the integration of AI. By automating routine tasks and leveraging advanced data analysis, AI can help credit unions streamline operations, make more informed lending decisions, enhance overall efficiency – and enhance the productivity of their lending staff.

Loan underwriting involves numerous tasks, including data entry, credit checks, and document processing. These tasks, although crucial, are repetitive and prone to human error. By leveraging AI technologies, credit unions can automatically identify documents, validate policies, more accurately calculate consumer incomes, and serve their member and indirect lending partners more quickly. Machine learning algorithms can extract relevant information from loan applications, process supporting documents, and accurately enter data into the system. This automation frees up employees to focus on more complex and value-added activities, such as relationship-building with borrowers… or auto dealers.

Even better, AI also has the potential to bridge the gap in access to credit for underserved populations. Traditional lending practices often unintentionally disadvantage certain protected classes due to biases inherent in human decision-making. AI algorithms can help overcome these biases by focusing on objective data points and removing subjective judgments. By leveraging vast amounts of anonymized borrower data, AI can identify patterns that were previously overlooked, leading to fairer and more inclusive lending practices. This expanded view of creditworthiness has the power to uplift underserved populations, opening doors to financial opportunities that were once out of reach.

More Personalized Loan Offerings

AI technologies can leverage borrower data to offer personalized loan offerings tailored to member needs. By analyzing various factors such as income, expenses, credit history, and spending patterns, AI algorithms can generate personalized loan products and interest rates.

This level of personalization enhances member satisfaction, improves the borrower experience, and increases the likelihood of loan approvals. By using AI to match borrowers with the most suitable loan products, credit unions can foster stronger relationships and loyalty among their members.

Enhanced Fraud Detection and Prevention – That Improves Over Time

AI can also help credit union lending programs with advanced fraud detection algorithms. By analyzing patterns, anomalies, and historical data, AI can identify suspicious activities and flag potentially fraudulent loan applications. This proactive approach helps credit unions mitigate financial losses, protect their reputation, and maintain the integrity of their lending operations.

One of the significant advantages of AI is its ability to learn and improve over time. By continuously analyzing loan performance data, AI algorithms can refine their risk assessment models and identify new patterns or factors that impact repayment behavior.

The rapid growth of AI presents a transformative opportunity for credit union lending. By automating routine tasks, AI frees up valuable time for credit union staff to focus on building relationships and providing exceptional service – while empowering our industry to better compete in the ever-changing financial services space. Learn more about how AI can help your credit union by requesting a demo or by emailing Partnerships@Origence.com.

About the Author

Bill Lynch, vice president, partnerships at Origence, leads the sourcing, growth, and management of partnerships in support of strategic initiatives. Bill has been with Origence for three years. Before joining Origence, Bill held various roles at Ally Financial, post-acquisition of BlueYield, an automotive refinance company that he helped build. Prior to working in the auto finance industry, Bill held a progression of positions in automotive retail.