The ever-evolving progression of automation and computer science is shaping the future of the business world, and the financial services industry is projected to be at the forefront.
The rise of technology as we know it, forecasts Artificial Intelligence (AI) to be at the centre of business, with changes destined to impact the banking and finance sector. This will see a predominant shift in the usual manner of credit decisions and advice for banks, advisers and lenders.
AI is at the cutting edge of technology, and is essentially a working-progress towards the creation and implementation of “intelligent machines” into the workforce. The aim of this innovation is to introduce “bots”, as such, to work and perform like humans.
What this means for Banking and Finance
Changes to credit decisions and advice
Just like the AI that we already have in everyday life, like Siri in our iPhone’s; robotics engineers program data into AI so “they” know how to respond to certain questions we have.
But although robotics engineers may be able to program data into AI, that’s just it; they only know “data”, the personal and emotional element is absent.
When it comes to banking and finance, credit decisions and advice will shift dramatically with AI.
The reason being is that AI robots will be programmed to have a specific criteria for who is considered eligible when applying for a loan or asking for advice. The robots artificial “brain” will have automated answers for questions, and a yes or no outcome for eligibility.
AI results in a loss of the human, emotional element; the one in which advisers and lenders provide advice, and make decisions not only based on what clients “look like on paper”, but also on their gut feeling as to whether they find a potential client reliable or not. AI will eliminate this “grey area”.
AI is already heavily present in marketing, as our smart phones, laptops and other devices “remember” what we research. Have you ever looked up a product online and then later that day it pops up on your Facebook feed? This is AI.
When it comes to borrowers, AI is likely to use information from the open banking world, social media, and any other accessible information related to the potential borrower to form credit decisions.
Changes to the method of valuing properties
There has been various discussions in the banking and finance market with regards to the future of buying properties and the programming of AI to assess value.
It has been mentioned that AI will be modelled and encoded to assess the value of a property based on location and imagery. This will see some changes to the property market.
With set coding on location value and imagery, AI indicates a likely positive impact on the financial services industry in this sense. As, with the shift from humans valuing properties, the biased, personal preference will be taken away, providing a much more consistent valuing system.
What this means going forward
As AI is moving forward at an unprecedented pace, advisers and lenders must prepare for change. Several leading U.S. banks have already implemented AI services into their day-to-day business, and New Zealand is not far behind.
What this means for non-bank lenders going forward is aiming to keep the human element alive.
Because of the “black and white” nature of AI, and the loss of emotional element that banks will have because of it, this provides an edge for non-bank lenders.
Non-bank lenders like Core Finance will maintain traditional methods of lending for a longer period of time than banks, due to the corporate scope of banks and the need to move forward with technology more rapidly.
This will provide the opportunity for clients and borrowers that seek the emotional element, to borrow from dependable non-bank lenders like Core Finance.
In the aim to keep the human element alive, advisers and lenders need to enhance innovation and intellect.
This will involve networking, maintaining and growing professional relationships. As, this is the fundamental human skill that cannot be imitated by technology. Being inquisitive and well-informed about what is going on with AI in the market will also be essential.
Change is inevitable, and whether we like it or not, AI is the future. We may all have to embrace it in some way; whether that be in regards to credit decisions, financial advice, or valuing properties. It is how we choose to embrace it that will be important.
Written by freelance writer Alix Dougherty