The Use of AI in Loan Decisions - Unitas Financial Services


AI lending small banks and credit uniondAcross the world, machines are getting smarter. Artificial Intelligence, or the theory and development of computer systems able to perform tasks that typically require human intellect and decision-making, impacting our lives and is already present in our day-to-day lives.

Artificial Intelligence, or the theory and development of computer systems able to perform tasks that typically require human intellect and decision-making, is increasingly impacting our lives on a day-to-day basis.

In the banking and financial services industries, artificial intelligence exists via chatbots, to assist in cracking anti-money laundering patterns, to provide algorithmic backing in making financial decisions, help decrease fraud, and provide value in recommendations to consumers based on historical patterns, to name a few.

Community banks and credit unions, like those we partner with at Unitas Financial Services, can utilize artificial intelligence tactics to stay at the top of their game and provide exceptional customer service while creating efficiencies within the organization. The benefits to small banks and credit unions include the ability to create better member interactions by utilizing chatbots, anti-fraud mechanisms, and creating recommendations based on historical data. For example, if a consumer is financing a new vehicle, recommendation engines can provide historical data from previous experiences to assist in the recommendation of products like GAP insurance or VRP.


While banks and credit unions can gain an edge over competitors by implementing basic artificial intelligence practices, the question remains of whether financial institutions are ready to cut out the human element and rely on the data and decisions provided solely by machines. Industry-wide, credit scoring is becoming automated, but is the auto-financing world is ready to give up all human interaction to autonomy?

How can a machine provide answers to the various questions underwriters ask themselves? Questions that underwriters must ask themselves when choosing to finance a loan include:

Much like Unitas Financial Services, banks and credit unions must assess each individual application and that assessment is reliant on human experience. Artificial Intelligence relies on a formula that provides a yes or no answer and leaves no room for the grey area or human element. The grey area is the application of human experience, where a loan officer considers the relationship to ultimately make the right lending decision.

The decision to approve a loan, whether it be a consumer, mortgage, or commercial loan, opens a financial institution to risk. Lenders can use artificial intelligence and other tools to help make decisions and negate that risk but ultimately they must consider the relationship that retains customers.Unitas Financial Services builds trust through its relationship with our customer banks and credit unions to make decisions, with minimal artificial intelligence. We trust our customers to make the best decisions for their borrowers while helping them mitigate risk through our collateral protection and risk management products. For example, a GAP policy sold by a lender at the time the loan is made helps mitigate risk for the lender and the borrower by covering the GAP in what the vehicle is worth and what is owed on a loan in the case of a total loss. In the case of mortgages, Equity Default Protection supports increased loan production, allowing higher LTV limits on second mortgage, home equity, and home improvement loans, while mitigating the risk of borrower default. Blanket protection protects a financial institution in the case of lapses in the borrowers insurance coverage. Regardless of the type of loan,Unitas Financial Services provides coverage to protect the risk that exists in the black and white as well as the grey area of lending.

While the banking and financial industry is skeptical of the reliance on artificial intelligence, you can be sure that the industry will continue to monitor available instruments and perfect those over time. This will ensure that when the switch does occur, the systems are provided with all relevant information to make the best economic decisions. However,Unitas Financial Services believes that while AI will streamline lending decisions in the future, the customer relationship will always be a factor in making these decisions.

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