SOCIAL media behavior and online footprint can be integrated into the underwriting process for loans from digital banks and mobile lending apps using artificial intelligence (AI), a big data company based. in Singapore.
Digital banks and financial technology (fintech) platforms are typically designed to reach unbanked sectors to promote financial inclusion. However, the unbanked population generally does not have a credit history to support loan applications.
With advancements in technology like AI, an alternative credit profiling process is helping the unbanked segment apply for the much-needed financing, Advance Intelligence (Advance.Ai) Pte. Ltd.’s regional sales manager, Aradhna Sharma, told BusinessMirror in an interview.
How often an email address and cell phone number are used is a potential metric for loan approvals, she explained, noting that this is part of verifying the borrower’s identity. .
“If you sign up with an email address, there are services that can determine when the email address was created by browsing the web,” Sharma explained.
Email address activities, such as website logins and online purchases, can be tracked to ensure the email is valid. If there’s not a lot of use, she said it was potentially a red flag.
“With Advance.Ai, we can check the status of the phone. Is it currently working? Is it offline? Is it off? she added, explaining that checking these conditions will help financial institutions to verify whether the cell phone number is wrong or not.
There is also a search tool that allows digital banks and fintech platforms to search for a person’s personal information, such as name and date of birth and fingerprint indication online, Sharma explained.
Tracking a borrower’s online behavior, she said, can help determine potential credit risk.
“What these innovative solutions try to do is help you pull together the data already available to help you create an online credit profile that makes it easy for you to get loans accepted,” Sharma explained.
Consent is the key
SHARMA explained that all information collected by AI tools is publicly available.
“The truth is, with so much activity online, your information is already being collected through the apps you use, through Google, through GPS. [global positioning system], “she said.” It’s not that it’s not actually being collected; it’s just that it’s not currently being used in a way to help you.
Still, Advance.Ai stressed that borrowers should be able to understand what they are agreeing to when they apply for a loan digitally. Sharma said customers should be aware that their online public data is being used to build their credit profiles. Borrowers should have the option of engaging an online service provider to explain the vague elements of loan terms and agreements before signing the agreement, she said. Sharma said digital banks should “provide proof that they [loan agreement] has been communicated to the client and clients have accepted and given their consent.
This can be done by asking borrowers to place their electronic signatures in each section of the loan agreement, recognizing each term of the loan, she explained. Sharma said the loan process could also be part of the electronic “know your customer” part.
Digital banks, she said, also need to be able to draw a line when data collection is already deemed excessive. “There obviously has to be a law that protects data privacy,” Sharma added.
The company also highlighted the importance of the data management strategy for digital banks, with Sharma explaining that it is the organizations roadmap.
“This roadmap ensures that all activities surrounding data management, which include from collecting to collaborating data, are able to work together effectively and efficiently and as useful as possible to government. [for audits and reporting], “she explained.
Sharma listed two classifications of data management strategy: defensive and offensive.
The defense is “to minimize downside risks, ensure regulatory compliance … and build systems to prevent theft,” she explained. “Data breach focuses on supporting business goals, such as increased revenue, profitability, customer satisfaction. “
“We guide our clients towards adopting a framework that not only promotes efficient use of data and resource allocation for example, but also helps organizations design their data management activities to support overall business goals. “said Sharma.
In November of last year, Bangko Sentral ng Pilipinas released the Digital Banking Framework, recognizing digital banking as a new category of banking. According to the regulator, candidates for digital banks should be able to have an effective data management strategy and practices, in addition to strong digital governance and a secure technological infrastructure.