The recent advancements in machine learning and Artificial Intelligence allow many improvements for businesses. Complex AI models can be used to calculate and analyze the risk associated with investment decisions. AI-based predictive modeling techniques are expected to improve the decision making process for management by finding out the most profitable outcome in a given situation.
The application of AI technology can also help mitigate business exposure to fraud. Fraud attacks and deceptive practices have become very sophisticated and even the most experienced of auditors can get fooled by con artists and scammers.
A well designed AI model can collect and process historical data from hundreds of locations in the blink of an eye. AI is designed to learn and react quickly while continuously evolving its processing capability. It is hoped that AI will become far better at detecting frauds than humans in the near future.
AI Application for Credit Rating Tools
The banking sector based on lending plays an integral role in any economy. Statistics show that consumer debt in the U.S. alone was just under $4 trillion dollar in 2017. Even a small improvement in their operations would result in cost savings worth billions of dollars.
This is why banks and lenders are constantly looking for ways to improve their services to customers. Two ways to do this is through improvements in credit rating for potential borrowers and faster processing times. Both these objectives can be achieved through the implementation of AI technology.
At its core, credit rating involves checking for hundreds and even thousands of transactions over a period of time to determine a pattern. This is an area that machine learning is naturally suited for.
It should be noted that the more data that is available for an AI to analyze, the better it can predict the credit worthiness of the potential borrower. This is why developers are looking to integrate the blockchain technology with AI analysis. Blockchain potentially offers a complete record of transactions that have taken place on the ledger and the most comprehensive record that can be available online.
Detecting New and Existing Customers Risk
Detecting risk is all about calculating the probability or threat of damage, loss or any other negative occurrence. In the context of lending, this involves loan defaults and delayed payments from customers.
There is no lending that is completely risk free. This is understood by lenders and banks. Every time a loan is advanced, there is a chance that the borrower may default on his or her payments. For some borrowers, the probability is higher. For others, it is low. But it is never zero.
Finding out the risk is important as lenders take the probability of default into consideration when approving or rejecting loans. It is also important to identify the risk as lenders must include a risk premium into the payment plan.
This is why people with higher credit rating are able to get loans approved more frequently and at lower interest rates than people with a lower credit rating. The bank is simple charging them higher for the extra risk that it is taking.
While a loan underwriter can make a very good analysis to determine risk, nothing beats an AI model at determining the precise risk associated with a loan application. The AI would consider every historical transaction from the potential borrower as well as the pattern of payments, the income level, spending habits and other factors to calculate the risk.
Real Time Sector Changes
The process of risk management doesn’t end at the loan approval stage. Lenders must monitor their borrowers’ credit worthiness frequently to be aware of the risk to their outstanding debt. While this can be difficult to achieve through human effort, the process can be automated through AI to be completed seamlessly.
Developers believe that future improvements in AI will improve fraud and risk detection for lending businesses. Combined with the blockchain platform technology, AI gives us the best chance of detecting and preventing fraud.
Find out more about Calero and our token launch at our site: Calero
Join us on Telegram:
https://t.me/officialcaleroWebsite:
http://calero.io/Follow us on Facebook and Twitter for the latest news and developments
