Retail banks will increasingly use artificial intelligence to help determine credit ratings, says GlobalData
July 13, 2017 (Investorideas.com Newswire) Artificial intelligence (AI) is anticipated to make a significant impact on the retail banking sector, such as using non-traditional data types to assign credit ratings to potential borrowers, according to research and consulting firm GlobalData.
The company's latest report explains how technologies such as machine learning, predictive analytics, and natural language processing (NLP) are already making their mark in banking, with both front-office and back-office operations set to be transformed.
From the consumers' perspective, NLP technologies such as chatbots are starting to allow more effortless and intuitive interactions with banks. These chatbots often employ highly advanced analytics to offer financial insights to consumers, such as warning them when they are likely to go overdrawn or recommending changes in behavior that will allow them to save money.
Daoud Fakhri, Principal Analyst for Retail Banking at GlobalData, states: "Consumers, especially younger ones, can lack confidence around financial matters and find it hard to manage their finances effectively. There is therefore a potentially large market for AI-based services that offer a guiding hand or can assume some of the responsibility for making appropriate decisions."
AI will also transform behind-the-scenes operations. One area that is already experiencing significant change is lending. Traditional credit scoring techniques are ill-equipped to deal with consumers who lack conventional credit records, which is a common occurrence in developing markets. However, some lenders are now using AI to analyze non-traditional types of data, such as mobile phone usage and social media profiles, to predict the creditworthiness of borrowers.
According to Fakhri: "Although these consumers may not have access to regular banking services, many are heavy users of mobile phones and social media, and this generates huge amounts of data that can be analyzed to model their financial reliability. There is therefore huge potential to widen access to credit without exposing lenders to higher levels of risk."
- Comments provided by Daoud Fakhri, Principal Analyst for Retail Banking at GlobalData.
- Information based on GlobalData's report: The Future of Artificial Intelligence in Banking.
- This report was built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis conducted by GlobalData's team of industry experts.
4,000 of the world's largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData's unique data, expert analysis and innovative solutions, all in one platform. GlobalData's mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.
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